Gold prices fell nearly $30, concerns about the situation in the Middle East cooled, and higher U.S. bond yields hit bullish morale provider FX678

On Monday (April 22) in the Asian market, spot gold fluctuated and fell, hitting a low of $2,361.98 per ounce, down nearly $30 from last Friday’s closing price, as market concerns about the escalation of conflicts in the Middle East cooled, while U.S. Treasury yields rose. Putting pressure on dollar-denominated gold.

(15-minute chart of spot gold, source: Yihuitong)

The U.S. 10-year Treasury yield rose slightly, last trading at 4.664%, close to the more than five-month high set last week, with an increase of about 1%, making non-yielding gold less attractive to investors.

In the Fed’s latest survey of contacts, persistently high inflation and prolonged high interest rates were cited as major risks to financial stability.

Chicago Fed President Goolsbee said on Friday that progress in lowering inflation this year has “stalled”, becoming the latest policymaker to reverse his view on a rate cut after focusing on the need for one soon.

Interest rate futures show that the market has basically given up expectations of interest rate cuts in June and July, and the probability of a rate cut in September is only 64.5%.

Analysts also pointed out that gold prices fell quickly after rising high last Friday, indicating that geopolitical uncertainty is also losing its grip on the market.

“The problem with the Iran-Israel story is that the story currently has little firepower left. When Israel initially attacked the Iranian embassy, ​​market participants expected a strong reaction. Iran’s reaction was more dramatic than anything else, Traders are concerned,” said Naeem Aslam, chief investment officer at Zaya Capital Markets. “The response from the Israeli government has been very, very limited, and traders are not concerned about it right now. All of this leaves gold in consolidation territory with downside risks.”

According to reports, Israeli leaders and the military currently prefer to remain silent. Iranian media’s reaction to Friday’s attack was also muted.

Some analysts say that as geopolitical tensions stabilize, the market may start to focus on more fundamental dynamics in the market, which does not bode well for gold in the short term.

The gold market was even able to withstand unexpectedly hawkish comments from Federal Reserve Chairman Jerome Powell, who said at an event in Washington, D.C., that the central bank was not confident enough to cut interest rates following the latest inflation report.

Some analysts say this environment will continue to support rising bond yields and a stronger U.S. dollar, two traditional headwinds for gold.

Ole Hansen, head of commodity strategy at Saxo Bank, said: “I worry that this market may suddenly wake up one morning and realize that the dollar and yields are significantly higher and the prospect of a rate cut has all but disappeared.”

However, Hansen added that the market could be quite resilient and that it could still surprise investors given the uncertainty in global financial markets.

“My biggest concern is the large number of long positions by hedge funds, but most of these positions were initiated at much lower prices, although their stop loss levels have been raised as the positions have been established, which we can easily see $50 down without panicking anyone,” he said. “From a trading psychology perspective, it makes sense that some trigger-happy bulls would start taking some chips off the table.

At 11:26 Beijing time, spot gold was trading at $2,364.08 per ounce.