Gold prices steadied on Thursday as growing bets on U.S. interest rate reductions offset upward pressure from elevated real Treasury yields.
Futures for the most-active contract on the Comex division of the New York Mercantile Exchange were little changed at $2,320.50 per ounce by 0900 GMT, after a 0.4% decline in the previous session. The metal has fluctuated in a narrow range this week, trading between $2,300 and $2,350 per ounce.
Investors’ expectations for Federal Reserve rate cuts have firmed following softer-than-expected U.S. consumer price inflation data released on Wednesday. The data showed annual headline inflation easing to 3.3% in May from 3.4% in April, reinforcing bets for a policy pivot later this year. Fed funds futures now imply a roughly 68% probability of a rate cut by December, up from about 55% a week ago, according to CME Group’s FedWatch tool.
However, rising real yields—adjusted for inflation—have limited gold’s upside. The U.S. 10-year real yield, derived from the inflation-protected Treasury (TIPS) yield, rose to around 2.05% on Thursday, near its highest level in over a month. Higher real yields increase the opportunity cost of holding non-yielding assets like gold, traditionally pressuring prices.
‘The market is balancing two competing forces: the improving inflation backdrop and the resilience of real yields,’ said a trader at a major bank in Singapore. ‘Gold remains supported by macro uncertainty but faces headwinds from higher real rates.’
Analysts at UBS noted in a client note that while gold’s medium-term outlook remains constructive due to geopolitical risks and central bank buying, near-term price action will likely stay range-bound until either the Fed signals a clearer path to easing or real yields retreat further.
Central bank purchases, which have been a key demand driver this year, slowed in April after record buying in the first quarter, according to the World Gold Council. Net official sector purchases totaled 33 tonnes in April, down from 78 tonnes in March.
Technical levels to watch include the $2,300 support and the $2,360 resistance, with a break in either direction potentially setting the tone for the next leg of price action.
The yellow metal’s performance this week underscores the tug-of-war between monetary policy expectations and the enduring appeal of gold as a hedge against uncertainty.
