XAU/USD retreats from mid-May highs as rising US bond yields and Fed policy uncertainty weigh on demand despite a weaker dollar.
Gold prices retreated from a mid-May high during Tuesday’s Asian session, failing to breach the $4,700 level. The pullback followed a rebound in US Treasury yields, which erased earlier declines after the Treasury Department’s expanded buyback strategy provided only temporary relief. Concerns over the US national debt, now exceeding $40 trillion, have fueled demand for bullion as a hedge against currency debasement, though rising yields limit its appeal as a non-yielding asset.
Yields on 10-year and 30-year Treasuries climbed back above pre-announcement levels after initially dropping on news of doubled buyback operations starting in September. The US dollar remained subdued, however, as softer July inflation data reduced expectations for an immediate Fed rate hike. Markets now price in a roughly 75% chance of a rate increase by year-end, driven by inflation risks from volatile oil prices and rising US-Iran tensions.
Despite the dollar’s weakness, gold’s upside remains capped by the resurgence in Treasury yields and lingering Fed policy uncertainty. Traders continue to monitor inflation trends and geopolitical developments for further direction.