Gold price drifted lower at Thursday’s trading sessions in London as investors await U.S. economic data on guidance around inflationary pressures. The surging Treasury yields also put a dent on the precious metal’s appeal.
Gold Price Bugs Tamed by Surging Treasury Yields
At press time, gold price bugs faced an uphill task in staying above the $1,780 support levels as the dollar, rallied near its 11-week highs. The yellow metal has since entered a window of time where the US Treasury yields gathers momentum with shifts on the US bond yield curve, further revealing a period with stronger short- and intermediate-term rates had been consistent with a stronger greenback.
Although the precious metal is widely used as a hedge against fiat inflation, an interest rate hike from the U.S Central Bank increases the opportunity cost of holding it.
Gold Price Bugs Tamed
Metal traders are holding to the most recent hawkish bias coming from Dallas Fed President Robert Kaplan, hinting that the world’s largest economy will likely meet the U.S Fed’s threshold for tapering earlier than expected.
However, gold price bugs remain supported in the mid-term, with the U.S Federal Chairman Jerome Powell, affirming their commitments to staying dovish though he added that a gradual withdrawal of emergency support could happen later this year, further suggests the precious metal will unlikely break above $2,000 per ounce in 2021.
Historically, the yellow metal has a mutual relationship with volatility especially during greater uncertainty, suggests the precious metal might still benefit during periods of higher volatility.
With Bearish momentum taking shape and the modest pickup in US Treasury bond yields the yellow metal might be heading back towards April 13 low near $1,745 price levels during the south-run to its yearly lows pegged at $1,678 per ounce.