Gold price (XAU/USD) is demonstrating a sheer contraction in volatility after a recovery move from $1,980.00. The yellow metal is struggling to extend its recovery as the US Dollar Index (DXY) has rebounded firmly after defending the critical support of 101.65.
Investors have channelized their funds into the USD Index considering its safe-haven appeal as the Federal Reserve (Fed) is expected to raise rates to weigh more pressure on stubborn inflation. The demand for USD Index looks feasible for the short term as United States inflation has softened dramatically and labor market conditions have loosened further.
Meanwhile, retail demand by households has also dropped amid higher costs of financing and tight credit conditions by US commercial banks. The wholesome scenario indicates that the Fed won’t extend rates further vigorously and will consider a pause in the same to avoid indulgence of the economy into recession. But, in the current scenario, more rate hikes cannot be ruled out.
Considering the recovery in the USD Index, the demand for US government bonds has dented again, which has resumed the upside journey of US Treasury yields. The yields offered on 10-year US Treasury bonds have jumped above 3.58%.
Also Read: Gold Price Forecast: XAU/USD juggles above $2,000, US Dollar softens despite hawkish Fed bets
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