Gold sinks below $3,400 despite ongoing Middle East tensions

NEW YORK (June 16) Gold price tumbled below $3,400 during the North American session, down over 1% despite tensions in the Middle East remaining high as the Israel-Iran conflict escalates. At the time of writing, XAU/USD trades at $3,399 after reaching an eight-week peak of $3,452.

On Friday, Israel attacked Iran’s military and nuclear facilities and targeted major officials after arguing that Tehran could produce nuclear bombs within days – an argument in opposition to US intelligence. Talks between the United States (US) and Iran have halted due to Israel launching the war.

In breaking news, Gold rallied sharply. Nevertheless, Bullion has retreated as Iran signaled that it's ready to end hostilities and resume talks about its nuclear program – according to the Wall Street Journal (WSJ) – which has improved risk appetite. However, some Iranian officials have denied that report.

Major central banks are expected to deliver their latest monetary policy decisions. The Federal Reserve (Fed) is projected to hold rates steady. Traders are also eyeing the decisions of the Bank of Japan (BoJ) and the Bank of England (BoE).

Ahead in the week, following the Fed’s decision, the US docket will feature the release of Retail Sales, housing, and business activity data revealed by the Fed's regional banks.

Daily digest market movers: Gold retreats, but rising geopolitical risks loom

• Despite retreating, Gold is expected to edge higher as major central banks, such as the People’s Bank of China (PBoC), are likely to continue their buying spree.
• The latest inflation reports in the US warrant further easing by the Fed. Any dovish hints by the US central bank could boost Gold prospects as the non-yielding metal fares well in lower interest rate environments.
• Geopolitical risks would keep Bullion prices higher. The lack of progress in Russia-Ukraine talks and the Middle East conflict broadening to include Iran would keep the yellow metal underpinned by risk aversion.
• US Treasury yields are recovering, with the US 10-year Treasury yield rising over three and a half basis points (bps) to 4.446%. US real yields followed suit, edging up almost four bps to 2.166%, capping Bullion’s advance.
• The US Dollar Index (DXY), which tracks the value of the Dollar against a basket of peers, is down 0.16% at 97.98, close to hitting a multi-year low of 97.60.
• Money markets suggest that traders are pricing in 46 basis points of easing toward the end of the year, according to Prime Market Terminal data.

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