Gold price rallies on softer US Dollar

US Dollar Index (DXY) paused a four-week uptrend the last week by ending the Friday’s North American session around 104.50. In doing so, the greenback’s gauge versus the six major currencies justified downbeat prints of the United States statistics, as well as a pullback in the US Treasury bond yields.

That said, US ISM Services PMI for February came in as 55.1 versus 54.5 market expectations and 55.2 market forecasts. The inflation component of the PMI survey, the Price Paid sub-index, edged lower to 65.6 in February from 67.8 but surpassed analysts' estimate of 64.5. The New Orders sub-index rose to 62.6 from 60.4 and the Employment Index advanced to 54 from 50 in the same period. Previously in that week, the US Durable Goods Orders for January eased while the Conference Board’s (CB) Consumer Confidence also flashed mostly downbeat details.

While the United States data eased, the Federal Reserve (Fed) talks remained hawkish and tried to defend the US Dollar bulls, as well as propel the US Treasury bond yields. Over the weekend, San Francisco Federal Reserve Bank President Mary Daly said that if data on inflation and the labor market continues to come in hotter than expected, interest rates will need to go higher, and stay there longer, than Fed policymakers projected in December, as reported by Reuters.

It should be noted, however, that the US Treasury bond yields initially refreshed the multi-month high before weighing on the US Dollar, as well as allowing the Gold buyers to retake control. The reason could be linked to the unimpressive US data and the market’s receding fears of recession, mainly favored by headlines from China. That said, the US 10-year Treasury bond yields rose to the highest levels since November 2022 before easing to 3.95% at the latest while the two-year counterpart poked the July 2007 levels.