Gold Loses its Shine Below 3400.  Even though the world is in chaos, What is causing the decline?

Despite the Middle East’s political upheaval, gold prices have fallen below 3400, confusing investors.   The precious metal dropped to 3399 during the North American session on Monday, June 16, after briefly reaching an eight-week high of 3452.   The drop occurs at a time when tensions between Israel and Iran are rising, and Tehran has given surprising indications that it may be willing to discuss nuclear weapons again.

This significant shift in tone has reduced people’s interest in gold as a safe haven.   According to the Wall Street Journal, Iran appears willing to deescalate the situation.  This has stabilized global risk sentiment, prompting traders to turn their focus to other assets.   However, Iranian authorities have issued contradictory remarks, raising questions about the reliability of this diplomatic change.

The interest rate decisions that major global banks will make soon will muddle matters much further.   Traders are keeping a close eye on the US Federal Reserve to see whether they provide any dovish signals, despite the fact that interest rates are expected to remain unchanged.   Gold prices tend to rise as interest rates fall because it is less expensive to hold onto the metal that pays no interest.   This week, central institutions such as the Bank of England and the Bank of Japan are also expected to influence how much investors want to buy.

Gold is also under pressure because US Treasury yields are rising.   The 10-year yield has risen to 4.446%, and real yields are following suit.  This makes gold less desirable in the short run.   However, many economists believe the long-term outlook remains positive since inflation concerns persist and central banks, particularly China’s PBoC, continue to purchase.

According to data from Prime Market Terminal, traders forecast more than 46 basis points in cuts later this year.   Gold’s next move could be influenced by both economic news and global event headlines, as significant US data releases, such as retail sales and housing, are approaching.

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