Gold enters a downward correctional cycle in wait for Israeli response

Gold prices declined in European trade on Tuesday on profit-taking, after the precious metal touched a record high on Monday while investors shun off major positions in wait for the Israeli response to the latest Iranian attack.

Gold futures are pressured by higher US treasury yields as hot retail sales data hurt the odds of Fed interest rate cuts in June and July. 

Now investors await important developments today, including Fed Chair Jerome Powell’s speech on North America’s economic directions.

Prices 

Gold prices fell 0.8% to $2364 an ounce, with a session-high at $2392, after closing up 1.6% on Monday, marking a record high at $2383 on haven demand. 

The precious metal hit a record high at $2431 an ounce on strong demand from investment funds and central banks.

Israeli Response 

Israel’s military officials asserted that Israel is preparing for a response to the attack launched by Tehran last week, while European and US officials called for restraint. 

Markets are waiting closely for the next Israeli step, as western and Arab countries try to convince the Israeli government that opening a front with Iran will carry negative consequences for Israel.

US Yields 

US 10-year treasury yields rose 0.8% on Tuesday to near a five-month high at 4.663%, pressuring non-yielding assets. 

The developments came after US retail sales data in March, which were far above estimates, indicating strong growth in the first quarter. 

The data sowed doubts about the timing of the next Federal Reserve interest rate cut as the economy continues to prove resilient. 

US Rates

Following the retail sales data, the odds of a Fed interest rate cut in June fell to 23%, while the odds of such a cut in July slid to 48%. 

San Francisco Fed President Mary Dale said on Monday that there’s no urgent need to cut interest rates.

Powell 

Federal Reserve Chair Jerome Powell is scheduled to participate in a fireside chat about economic trends in North America at the Wilson Center’s Washington Forum, in Washington DC, later today. 

The SPDR

Gold holdings at the SPDR Gold Trust rose 1.73 tonnes yesterday to a total of 828.45 tonnes, the highest since April 4.