Gold Price Forecast: XAU/USD extends losses near $1,970 as capital shifts to riskier assets

January 9, 2024 2:27 PM +07:00 - Gold price losses more ground, which can be attributed to the prevailing optimistic market sentiment, leading to a shift in capital towards other, more risk-inclined assets. The price of the yellow metal trades lower around $1,970 per troy ounce during the Asian session on Tuesday.

Moreover, the reduced demand for the precious metal is linked to the resurgence in US Treasury yields, as the 10-year US Treasury yield bounced back from the six-week low observed on Friday. At the time of writing, the long-term bond yield rests at 4.63%.

Join Pipscollector to learn the following main ideas:

  • Gold price declines as capital shifts toward riskier assets due to improved risk sentiment.
  • Gold demand is reduced due to the resurgence in US Treasury yields.
  • Upbeat China’s Trade Balance data could provide support for the price of the precious metal.

Gold prices fall as willingness to take risks improves

The positive momentum in US bond yields bolsters the strength of the US Dollar (USD), evident in the rebound of the US Dollar Index (DXY) from its two-month low, trading near 105.20 at the moment.

However, bullion prices saw an uptick as investor sentiment improved on speculation suggesting that the US Federal Reserve (Fed) might halt its monetary policy tightening, fueled by lackluster employment data from the United States (US). In addition, the latest report from the World Gold Council (WGC) reveals that the world's central banks acquired a combined 337 metric tons of gold in Q3. Year-to-date, these banks have added an impressive 800 tons to their reserves. Notably, emerging markets took the lead among the largest buyers, reflecting a continued trend of diversification away from the US dollar.

Demand for gold declined due to rising US government bond yields

However, the contained conflict in the Middle East between Israel and Hamas has prompted outflows from non-yielding assets like Gold.

Additionally, traders may keep an eye on China's Trade Balance data for October scheduled to be released later in the day, anticipated to climb to $81.95B from the previous $77.71B. A Trade Surplus exceeding expectations could potentially boost the demand for gold.

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