Gold Prices Rebound as US Dollar Retreats

In Monday’s Asian trading session, gold prices surged toward the $2,200 mark, fueled by a retreat in the US Dollar amid sluggish US Treasury bond yields and a mixed market sentiment.

The US Dollar is pulling back from a recent five-week high of 104.50 against major currencies, driven by renewed selling pressure in the USD/JPY pair and a stronger-than-expected Chinese Yuan fix. This downward movement in the Greenback is providing support for gold prices, helping the precious metal regain lost ground.

The USD/JPY pair is correcting further from its year-to-date highs of 151.86, following concerns over potential forex market intervention by Japanese authorities and mounting risks in the Japanese Yen.

Simultaneously, the People’s Bank of China (PBOC) set the USD/CNY reference rate lower than expected, contributing to the renewed weakness in the US Dollar. Reports of Chinese authorities selling USD/CNY to bolster the Yuan are also amplifying the Greenback’s decline.

Gold prices are bouncing back after a two-day corrective decline from their recent all-time high of $2,223, awaiting fresh catalysts to resume their upward trajectory.

The US Dollar experienced a significant rebound in the latter part of the previous week, stemming from a dovish interest rate outlook by the US Federal Reserve (Fed). Although the Fed’s economic projections suggested three rate cuts this year, markets had initially priced in only two after consecutive months of higher inflation readings. Following the March policy meeting, the Fed maintained key rates unchanged in the 5.25% to 5.50% target range.

Market sentiment is now anticipating a 75% likelihood of the Fed initiating easing measures in June, up from the pre-Fed decision estimate of 59%, according to the CME Group’s FedWatch Tool.

This week, investors will closely monitor speeches from Fed policymakers and the release of the Core PCE Price Index data, as the US economic calendar remains relatively light in terms of high-impact releases.

In the interim, market sentiment and US Dollar dynamics will continue to influence gold price movements, underscoring the interplay between geopolitical developments and precious metal valuations.

Financial Desk