Gold falls as U.S. bond yields, dollar advance
· Gold inched lower on Wednesday after posting its biggest jump in two months in the previous session, as firmer U.S. Treasury yields and dollar eroded the metal’s appeal.
· Spot gold eased 0.2% to $1,712.82 per ounce by 0525 GMT, after rising more than 2% on Tuesday as U.S. yields dropped and the dollar eased from multi-month highs. U.S. gold futures fell 0.4% to $1,710.70.
· “There’s an element of corrective price action after a very spirited gold rebound in the preceding 24 hours. (And) gold has been falling largely against the backdrop of yields rising,” said DailyFX currency strategist Ilya Spivak.
· U.S. yields recovered on Wednesday, reducing the appeal of holding gold, while the dollar also bounced back.
· A steady rise in bond yields makes holding gold less attractive as investors typically tend to gravitate toward assets that generate steady income in the form of interest or dividend.
· The $1.9 trillion U.S. Covid-19 relief bill has cleared procedural vote in the House of Representatives and is expected to be considered and passed on Wednesday.
· Large global stimulus measures to combat the economic fallout of the pandemic have fanned worries of higher inflation and lifted bond yields.
· The European Central Bank will discuss on Thursday the merits of intervening to bring yields down.
· A massive U.S stimulus, loose global monetary policy, widespread vaccine rollouts and reopening of economies are “potentially very inflationary and might force the Federal Reserve to tighten policy meaningfully sooner, which would be a really big headwind for gold,” Spivak said.
· Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell to the lowest since April on Tuesday.
· Gold Price News and Forecast: XAU/USD’s key levels to watch ahead of US CPI, stimulus vote
Gold Price Analysis: XAU/USD’s key levels to watch ahead of US CPI, stimulus vote – Confluence Detector
Gold (XAU/USD) bulls take a breather after the 2% recovery rally witnessed on Tuesday. The haven demand for the US dollar has returned amid a cautious market mood, as investors await the House of Representatives vote on the Senate’s $1.9 trillion stimulus bill this Wednesday.
The US Treasury yields keep its pullback from 13-month highs intact, underpinning the sentiment around the non-yielding gold. Ahead of the stimulus vote, the US CPI data will hog the limelight and have a significant impact on gold.
· Gold Price Forecast: XAU/USD remains at the mercy of US bond yields, US CPI eyed
Short-term technical outlook
From a technical perspective, the overnight recovery might still be categorized as a corrective bounce from oversold conditions and runs the risk of fizzling out rather quickly. Hence, any subsequent positive move might still be seen as a selling opportunity near the $1740 region. This, in turn, should cap the upside for the commodity near the $1760-65 strong horizontal support breakpoint. That said, a sustained move beyond will suggests that the metal has bottomed out and set the stage for some meaningful recovery in the near-term.
On the flip side, the $1700 mark now seems to protect the immediate downside. This is followed by support near the $1685-83 region, which if broken will be seen as a fresh trigger for bearish traders. The XAU/USD might then accelerate the fall towards June 2020 swing lows, around the $1670 level before eventually dropping to the next relevant support near the $1650 area.
· Silver fell 0.6% to $25.75 an ounce. Palladium rose 0.4% to $2,305.16, while platinum fell 1% to $1,157.29.
· More platinum deficits loom this year after a record undersupply of almost a million ounces in 2020, the World Platinum Investment Council said.
Reference: CNBC, FXStreet
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