Gold retreats below $1950 on higher Treasury yields

Gold price drops on risk-appetite improvement, and US Treasury bond yields are surging. The US Treasury bond yields rise, with 10-year TIPS, a proxy for real yields advancing above 1.30%.

The Federal Reserve will commence its two-day monetary policy meeting, expected to deliver a 25-bps rate increase. Gold price is tumbling across the board, down more than $30.00 or 1.59%, as US Treasury bond yields rise, while risk appetite improvement dented Gold’s demand.

Hence, US equities climb moderately as the Federal Reserve’s Open Market Committee (FOMC) meeting begins soon. At the time of writing, XAU/USD is trading at $1945.80 after hitting a daily high of $1985.08.

Traders’ fears calmed in the last 48 hours after the UBS takeover of Credit Suisse, and US banks continued to try to stabilize First Republic Bank. The Federal Reserve (Fed) would begin its March monetary policy meeting, with traders expecting the Fed to raise rates by 25 bps as Powell and Co. continued their efforts to curb stubbornly high inflation.

The Gold Index retreated most of its gains after reaching a YTD high on Monday at $2009.75. Since then, the yellow metal plunged 3.09%, as traders apparently booked profits ahead of the FOMC’s meeting. Money market futures anticipate an 83.4% chance for a quarter percent increase in the Federal Funds Rate.

However, there is still uncertainty around the potential outcome of Fed Chair Jerome Powell’s press conference, which could cause instability in financial markets. Another reason for XAU/USD’s fall is that US Treasury bond yields are climbing. The US 10-year Treasury bond yield is 3.58%, up nine bps.