Gold prices hovered around $4,176 at 9:00 AM, down 0.14% since the opening of the Asian session on Wednesday.
Gold's upside potential remains limited as rising oil prices heighten inflation risks and reinforce expectations of tighter monetary policy from the US Federal Reserve (Fed). A strong US Dollar and high US Treasury yields are also exerting pressure on the precious metal.
US Bond Yields Hit Multi-Year Highs
The 30-year US Treasury yield surpassed 5.61% on Tuesday, reaching its highest level since 2002. Meanwhile, the two-year bond yield fell by about five basis points, settling around 4.88%.
Rising bond yields increase the opportunity cost of holding gold, an asset that offers no yield. At the same time, higher energy prices threaten to raise overall economic costs and sustain concerns regarding inflation.
The combination of high bond yields, a strong US Dollar, and rising energy prices continues to limit gold's recovery, particularly as the market reassesses the trajectory of Fed interest rates.
PCE and Employment Data in Focus
Markets are currently awaiting US Personal Consumption Expenditures (PCE) Price Index data and employment reports for fresh clues regarding the direction of Fed policy.
Any signs of weakness in US inflation or the labor market could alleviate pressure on the US Dollar and bond yields, potentially allowing gold to regain strength.
Gold remains under pressure as long as bond yields and the US Dollar stay elevated. The $4,100 level remains a key support, while $4,200 acts as the immediate resistance. US PCE and employment data will serve as crucial catalysts in determining the next direction for XAU/USD.
