- The market is pricing in roughly 2.5 U.S. rate hikes in total by June 2027, while the expected Fed rate for mid-2027 has risen to around 4.3%.
- The U.S. 10-year Treasury yield climbed to around 4.8%, weighing heavily on gold and pushing prices down from roughly $4,700 to a test of $4,300 per ounce, although today we are seeing an attempt to move back above $4,400.
- Pressure on yields is being driven not only by expectations for the Fed, but also by structural factors including heavy U.S. government debt issuance, the AI investment boom and shifts in the global savings-investment balance.
- In the short term, higher yields and the prospect of further monetary tightening remain the main negative factors for gold.
- At the same time, the longer-term outlook for the metal remains more constructive due to the large U.S. fiscal deficit, the risk of a higher inflation premium and limited room for aggressive tightening given elevated government debt.
- Long-term investors are not showing signs of capitulation: gold holdings in ETFs remain close to local highs at around 98.95 million ounces. Long speculative positions in gold futures are also rebuilding in both the U.S. and China.
- From a technical perspective, key levels remain the U.S. 10-year yield around 4.81% and 5%; a further move higher could keep pressure on gold.
- A stronger recovery scenario for gold could emerge if U.S. data continues to come in below expectations — recent ISM and JOLTS readings, as well as today’s ADP report, disappointed — while oil prices begin to decline from current levels.
- Higher interest rates could eventually lead to a more pronounced economic slowdown or stress in the financial sector, forcing the Fed to pivot back toward a more accommodative policy stance later on.
GOLD chart, D1 interval
Source: xStation5
Source: XTB Research
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