GOLD PRICE SLUMPS AS US DOLLAR SOARS AMID HIGH US YIELDS

Gold drops pressured by strong USD and rising Treasury yields.

DXY hits new monthly peak at 106.13, 10-year yield is up 5.5 bps.

Fed’s Bowman hints at steady policy and possible hikes if inflation falters.

Upcoming PCE report expected to show mild inflation decline.

Gold price slumped more than 0.70% on Wednesday as the Greenback soars, underpinned by high US Treasury yields, ahead of the release of the Personal Consumption Expenditures (PCE) Price Index report on Friday. Investors are beginning to price out less easing by the Federal Reserve (Fed), sponsoring the buck’s last leg up. The XAU/USD trades at $2,301 after hitting a daily high of $2,323.

The US Dollar Index (DXY) hit a new monthly high of 106.13 due to the jump in US yields. The 10-year Treasury note yield gains five and a half basis points (bps) at 4.304%.

Fed Governor Michele Bowmanstated on Tuesday that monetary policy will remain steady for “some time” and added that a rate hike would be needed “should progress on inflation stall or even reverse.”

Focus this week will be on the Fed’s preferred gauge for inflation, the May PCE, which is expected to drop from 2.7% to 2.6% YoY, while core PCE is foreseen at 2.6% YoY, down from 2.8%.

Other data will be released, such as the Gross Domestic Product (GDP) Q1 2024 final reading, Durable Goods Orders and Initial Jobless Claims.