Introduction:

Spot gold faced downward pressure last week, closing with a loss amidst the backdrop of rising US yields and strength in the US Dollar Index. This market update delves into the factors driving these movements and their implications for gold prices in the near term.

1. Market Performance:

• Spot gold closed with a loss of 0.48% at $2025 on Friday, with a weekly decline of nearly 0.70%.
• US yields saw an increase, with the ten-year yields firming up by around 3.70% and the two-year yields up roughly 2% for the week.
• The US Dollar Index, which has risen nearly 3% from its cyclical low, closed at 104.08, registering a modest 0.12% increase for the week.

2. Influence of Resilient US Economy:

• A major theme driving market sentiment is the resilience of the US economy, reflected in recent economic data.
• The hawkish stance of Federal Reserve officials indicates a reluctance to cut rates in the near term, with a preference to see inflationary pressures subside further before considering rate cuts.
• Fed Chair Powell's post-FOMC statements support the notion that a rate cut in March is unlikely, contributing to market expectations.

3. Impact on Gold Prices:

• The prospect of a delay in rate cuts and the strength of the US economy have weighed on gold prices, as higher yields and a stronger dollar diminish the appeal of non-yielding assets like gold.
• Gold prices are likely to face continued pressure in the short term as investors adjust their expectations based on the evolving economic and monetary policy landscape.

Conclusion:

Last week's market dynamics, characterized by rising US yields, strength in the US Dollar Index, and a resilient US economy, contributed to the decline in gold prices. The hawkish stance of Federal Reserve officials further reinforced expectations of a delay in rate cuts, adding downward pressure on gold. As investors monitor economic data and central bank developments, gold prices are expected to remain sensitive to shifts in market sentiment and monetary policy expectations.