The hawkish stance of major central banks and the prospect of further interest rate hikes continue to act as headwinds for gold prices, which do not provide any yield. Additionally, the emergence of new US dollar purchases has proven to be another factor driving the outflow from XAU/USD. In fact, the US Dollar Index (DXY), which tracks the greenback against a basket of currencies, has reached its highest level in two and a half weeks and continues to receive support from expectations of further tightening by the Federal Reserve.
It is worth noting that the US central bank has signaled that borrowing costs may need to increase by up to 50 bps by the end of this year. Furthermore, positive macroeconomic data released on Thursday reaffirmed market expectations of a 25 bps rate cut at the next FOMC policy meeting on July 25-26. Moreover, Federal Reserve Chairman Jerome Powell stated earlier this week that he does not see inflation falling to the Fed's 2% target until 2025. This, in turn, continues to push US Treasury bond yields higher and support the US dollar.
It is worth noting that the US central bank has signaled that borrowing costs may need to increase by up to 50 bps by the end of this year. Furthermore, positive macroeconomic data released on Thursday reaffirmed market expectations of a 25 bps rate cut at the next FOMC policy meeting on July 25-26. Moreover, Federal Reserve Chairman Jerome Powell stated earlier this week that he does not see inflation falling to the Fed's 2% target until 2025. This, in turn, continues to push US Treasury bond yields higher and support the US dollar.
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