Gold price (XAU/USD) declined by 0.7% to approximately $4,490 during the European trading session on Thursday, pulling back from its 11-week high of $4,527 reached earlier in the day [1]. The retreat was attributed to a recovery in US Treasury yields, which had previously dropped following the US Treasury Department's announcement to at least double the maximum size of its liquidity-support buyback operations for longer-dated nominal securities. This move was intended to curb the sharp increase in borrowing costs, as reported by the Wall Street Journal [1].
As of writing, 30-year US Treasury yields rose by 0.5% to around 5.21%, while 10-year yields increased by 0.67% to approximately 4.67% [1]. Higher yields on interest-bearing assets reduce the attractiveness of non-yielding assets like gold, contributing to the metal's price correction [1]. Despite the Treasury's intervention, financial markets remain concerned about higher inflation projections due to elevated oil prices and widening government debt, which has led to a recovery in US bond yields [1].
Analysts at Jefferies commented that the Treasury's announcement does "little to address the underlying issues pushing bonds higher, which they said include unsustainable fiscal deficits and rising inflation expectations," according to Reuters [1].
From a technical perspective, XAU/USD is trading well above its 20-day Exponential Moving Average (EMA) at $4,299.17, maintaining a bullish near-term bias. The Relative Strength Index (RSI) stands at 64.64, indicating strong upside momentum that is not excessively stretched [1]. Immediate support is seen at the recent closing area around $4,490, with deeper demand at the 20-day EMA near $4,299. The path of least resistance remains to the upside unless a sustained drop toward the $4,299 region occurs, which could weaken the prevailing bullish tone [1].
CONCLUSION
Gold prices have corrected from recent highs as US Treasury yields rebounded, reflecting ongoing concerns about inflation and fiscal deficits. Despite the pullback, technical indicators suggest a bullish bias remains intact for XAU/USD. Market participants are closely watching yield movements and inflation expectations for further direction.