Gold Stays Below $1850 As Traders Remain Focused On Hawkish Central Banks

Key Insights

• Demand for gold remains under pressure as traders expect rate hikes from central banks. 
• Recession fears may provide some support to safe-haven assets. 
• Gold markets will likely remain extremely sensitive to yield dynamics in the upcoming trading sessions. 

Rising Yields Remain The Key Driver For Gold Markets

Gold continues to trade below the $1850 level as traders wait for signals from the U.S. Treasury markets.

Treasury yields have recently pulled back from multi-year highs but many traders believe that this is a temporary correction. Inflation remains a big problem, so the Fed will have to raise rates aggressively, pushing Treasury yields to higher levels. Other central banks face similar challenges.

High yields are bearish for gold which pays no interest. The rally in Treasury yields has already put significant pressure on gold and pushed it from the $2070 level in March to the recent lows near $1800.

Recession Fears May Provide Some Support To Gold

While higher yields continue to put pressure on gold markets, recession fears may increase demand for safe-haven assets and provide some support to gold bulls in the upcoming trading sessions.

Copper prices, which often serve as a barometer of economic sentiment, have recently declined to lows that were last seen back in August 2021. Demand for copper is sensitive to economic activity. When the economy slips into a recession, demand for copper declines, putting pressure on its price.

The price of copper is already down by roughly 20% from March highs. This move highlights growing concerns about global recession.

Recession fears may increase demand for safe-haven assets and provide more support to gold. However, it remains to be seen whether this support will be sufficient enough to push gold back to the $1900 level. In recent months, funds were flowing into the safe-haven U.S. dollar, creating additional pressure on gold markets.

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