Gold prices continued to stay under pressure and recently reached at $1679, the lowest level since early June, affecting the gold dealers in India. It then bounced modestly to the upside but remained under pressure about to pots the eight daily losses out of the last ten trading days.
In an environment of rising U.S. yields, growth recovery, vaccine rollouts, and investors getting more optimistic on growth prospects; hence demand for safe havens is expected to struggle.
Gold slumped last week, hurt by the rising Treasury yield environment. The rising Treasury yield, driven by strong economic data and an appetite for taking on risk, has sent the demand for gold falling continuously.
Higher US yields and a stronger greenback continues to be the key factor keeping gold on a negative bias. Not even risk appetite in the US has helped the yellow metal.
U.S. 10-year Treasury yields edged lower, raising the appeal of holding gold. 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.
It was a combination of U.S. dollar strength and market participants bidding the precious yellow metal lower that resulted in gold’s considerable decline
Two sessions and DOW gained nearly +1000 points on US Covid package but the NASDAQ slipped by 3% and most bond yields did not show huge positive traction.
Gold stayed below $1700 since Mondays opening and testing crucial support bands of $1680-1685. As said this and around $1678, all are significant support bands and on a pull back before Wednesdays’ report- CPI, Block buster data. It can be $1705-$1715 again.
Gold ETF holdings have now fallen three months in the last four and this trend is set to continue if yields continue inching higher.
On Monday, the yellow metal dropped to the fresh low since June 2020 amid the US dollar rally and strong Treasury yields defying commodity bulls. However, the bears seem to have stopped for a breather while waiting for the US House session on Tuesday.
The price of gold coins in Mumbai rose on Tuesday, as a pullback in U.S. Treasury yields added some lustre to the metal after it hit a nine-month low in the previous session.
Spot gold rose 0.7% to $1,692.21 per ounce during early trading hours in Tuesday. Prices had fallen more than 1% on Monday to $1,676.10, their lowest since June 5.
Gold picked up bids near $1,683, up 0.20% intraday, during early Tuesday. The yellow metal recently benefited from the recent halt in bond rout while also ignoring the US dollar’s sustained rally.
Rising bond yields have taken a significant bite out of the gold dealers in India this year, but investors shouldn't fear increasing nominal yields as real interest rates will remain negative for the foreseeable future.
We continue to remain optimistic on gold coins as the price is supported by long-term fundamentals, including rising debt levels and extremely accommodative monetary policy.
Additionally, issues concerning the vaccinations and economic recovery should also be observed as fears of the coronavirus (COVID-19) variants battle unlock efforts in the West.
Markets may have turned bearish for gold in the short term and neutral in the long term, we still see gold as investors favourite.
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