US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, drop for the second consecutive day by the end of Wednesday’s North American session, per the data source Reuters.

In doing so, the inflation gauge widens the gap from the highest levels since 2005 tested earlier in the week, around 2.70% at the latest.

The receding inflation expectations could be linked to the recent retreat in the US Treasury yields and the US Dollar Index (DXY). The White House optimism regarding the US supply chain seems to underpin the receding inflation fears.

However, the Fed policymakers remain divided on the reflation woes and the rate hike concerns, which in turn challenge market sentiment. That said, Chicago Fed’s Chief Executive Officer Charles L. Evans recently mentioned, per Reuters, “It will take until the middle of next year to complete the Fed's wind-down of its bond-buying program, even as the central bank remains 'mindful' of inflation.”

Moving on a lack of major data/events may keep the markets gyrated but receding inflation woes may exert additional downside pressure on the US bond yields and the greenback, which in turn could help the gold buyers to remain hopeful of visiting the $1,900 mark.

Read: Gold Price Forecast: XAU/USD grinds higher towards $1,900 on softer yields

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