Spot Gold plumbs 7-week low on strong USD, high bond yields

Spot Gold hovered above a fresh 7-week low on Wednesday, weighed down by a firmer US Dollar and high Treasury yields.

The US Dollar Index held close to a 6-week high. A firmer dollar makes dollar-priced Gold less appealing to international investors holding other currencies.

The yield on benchmark ​10-year US Treasuries remained at a more than one-year high. Higher bond yields tend to increase the opportunity cost of holding Gold, which pays no interest.

“Gold is running out of puff somewhat against this backdrop ​of rising yields, and a dollar which has a spring in its step courtesy ​of the hawkish shift in the rates outlook,” Tim Waterer, chief market analyst at KCM Trade, was quoted as saying by Reuters.

Market participants remain wary about the prospects for a US-Iran peace agreement. This caution, combined with ongoing inflation concerns and expectations of a more hawkish Federal Reserve, is helping the US Dollar maintain its recent strength.

US President Donald Trump said on Tuesday that America might need to strike Iran again in case a deal is not reached and that he had been an hour away from ordering an attack before postponing it following a request from three Gulf leaders.

Meanwhile, Vice President JD Vance said the US and Iran had made a lot of progress in their talks and neither side wanted to see a resumption of the military campaign.

Despite these remarks, markets remain doubtful that a durable diplomatic solution to the Iran conflict draws near.

Attention is now turning to the upcoming release of the Federal Open Market Committee minutes, which could provide further clarity on the Fed interest rate outlook.

According to the CME Group’s FedWatch Tool, traders are now pricing in over a 55% chance that the US central bank will raise borrowing costs by at least 25 basis points by year-end.

Gold was last down 0.07% on the day to trade at $4,478.96 per troy ounce.