Gold Struggles Near Two-Week Low as Rising Yields Offset Dollar Weakness

Gold prices hovered near a two-week low on Friday, finding limited support from a softer US Dollar, while rising Treasury yields kept gains in check. Trading in a narrow range around $3,340 per ounce during the American session, the precious metal struggled to surpass the key resistance at $3,350, reflecting cautious sentiment among investors.

Mixed US economic data added to the uncertainty. July Retail Sales rose 0.5% month-on-month, in line with expectations but below June’s revised 0.9% gain. On an annual basis, retail sales grew 3.9%, down from 4.4%, while the Retail Sales Control Group, a critical GDP component, increased 0.5%, missing the anticipated 0.8%. The data suggest a potential softening in consumer demand despite ongoing inflation pressures.

Geopolitical developments also influenced market sentiment. Investors remained alert ahead of the high-profile summit in Alaska between US President Donald Trump and Russian President Vladimir Putin, with discussions focused on a potential Ukraine ceasefire. While gold has yet to benefit from a safe-haven boost, any breakdown in talks could trigger sharp buying, whereas signs of progress could weigh on the metal.

US Treasury yields rose, capping gold’s upside. Stronger-than-expected US Producer Price Index (PPI) data renewed inflation concerns and tempered expectations for aggressive Federal Reserve rate cuts, reducing the appeal of non-yielding bullion. The benchmark 10-year Treasury yield climbed to around 4.302%, with the 30-year yield holding near 4.903%. Meanwhile, the US Dollar Index edged lower to 97.90 after Thursday’s rebound fueled by robust inflation data.

Additional economic indicators painted a mixed picture. The Empire State Manufacturing Index surged to 11.9 in August, beating forecasts, while US Industrial Production contracted by 0.1% in July, missing expectations for a flat reading. Consumer sentiment also disappointed, with the University of Michigan index falling to 58.6, well below expectations. These mixed signals, combined with rising inflation, have prompted traders to reduce expectations of a September Fed rate cut.

China’s growth indicators added another layer of caution. July Industrial Production rose 5.7% year-on-year, down from June’s 6.8%, while Retail Sales increased 3.7%, missing forecasts. As the world’s largest gold consumer shows signs of cooling demand, medium-term physical gold demand could face headwinds.

Technical Outlook: Gold (XAU/USD) remains under pressure, struggling to climb above the $3,350-$3,355 resistance zone. Immediate support sits at $3,330, with the next downside target near the psychological $3,300 mark. Momentum indicators point to mild bearish pressure, with the RSI at 40 and MACD remaining negative, suggesting that gold may continue to face challenges unless it reclaims key resistance levels.

Gold is navigating a delicate balance between weaker Dollar support, rising yields, geopolitical uncertainty, and mixed global economic signals. Traders will closely monitor upcoming US economic data and the Jackson Hole Economic Policy Symposium for further clues on the future path of interest rates and market sentiment.