• Gold drops to a daily low of $2,604 amid truce hopes between Israel and its neighbors.
• Safe-haven demand weakens as Hezbollah supports ceasefire efforts, while rising US Treasury yields further weigh on Bullion.
• Traders adjust Fed rate cut expectations with focus shifting to upcoming US inflation data, jobless claims and consumer sentiment.

Gold prices slumped sharply on Tuesday following a strong US jobs report and newswires revealing that Hezbollah supported calls for a truce in the conflict between them and Israel. Hence, hints of a possible de-escalation of the Middle East conflict opened the door for traders to book profits. The XAU/USD trades at $2,615, down more than 1%.

US equities remain underpinned by an improvement in market mood. Bullion remained near year-to-date (YTD) highs due to fears of further escalation of the Middle East hostilities. However, signs of a possible solution to the conflict would trigger outflows from safe-haven assets to riskier ones. According to CNN, “Hezbollah supports efforts aimed at achieving a ceasefire in Lebanon, its top official said on Tuesday.”

This sponsored a sell-off in XAU/USD, which tumbled over $35 to a daily low of $2,604 before buyers lifted prices to current spot prices. Additionally, the jump in US Treasury yields weighed on the non-yielding metal. The US 10-year benchmark note rate remains unchanged above 4%, yet it’s up over six basis points this week after last Friday’s September Nonfarm Payrolls (NFP) report.

Given the backdrop, interest rate traders adjusted their expectations about the Federal Reserve’s (Fed) next move. Most Fed speakers crossing the wires adopted a gradual tone regarding easing monetary policy. However, some, like St. Louis Fed President Alberto Musalem, projected only one additional cut toward the end of the year after backing September’s 50 bps cut.