Firm Treasury yields could continue to weigh on the metal amid ongoing inflation concerns. Lingering tensions in the Strait of Hormuz could continue to push oil prices up, reinforcing inflation concerns and weighing on bullion.
The country is at risk of stagflation, where slow economic growth is combined with rising inflation, as the energy crunch brought about by the war in the Middle East hits.
Escalating geopolitical risk continued to dominate global markets' concerns, with safe-haven demand keeping the dollar index anchored near a multi-week high.
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The U.S. dollar's value has fallen 8% over the past year, as the price of gold has skyrocketed, said the WSJ Dollar Index. Some think it is a good thing. President Donald Trump said recently a weaker dollar is great. The idea is a weaker currency boosts exports and employment while a strong currency can throttle an economy. While the idea of a weaker dollar has had supporters over the decades, economists often argue gains can be eaten up by domestic inflation and deflation.
The resilience of gold above $4,800 per ounce at this stage reflects a delicate and complex balance between traditional supporting factors and emerging pressures-one that cannot be superficially interpreted or reduced to the movement of the dollar alone. It is true that the U.S. dollar's retreat from its recent peaks, after failing to sustain its recovery momentum from a four-year low, provided gold with a short-term breather and attracted some buyers.
The expectations of a decrease in tensions triggered a pullback in oil prices, which in turn softened immediate concerns about inflation pressures. However, the broader geopolitical backdrop remains fragile, and any renewed escalation could quickly push oil prices, the dollar, and Treasury yields higher again.
The dollar stabilised to a certain extent today after retreating in the prior session, but could remain relatively volatile as markets react to geopolitical developments in the Middle East. Treasury yields were firmer following a pullback on Monday as well.
