Gold Prices Depressed Dollar Strengthening And US Bond Yields

Rising US bond yields lifted the dollar and weakened gold prices. Markets look forward to the Fed's monetary policy next week.

Gold prices fell in the trading session Tuesday (18/January) night. The strengthening of US Treasury bond yields helped lift the US dollar, causing gold prices to slip. At the time of writing, the spot gold price was down 0.3% to $1813.08 per ounce. Gold futures on the Comex in New York are down 0.2%, as is the XAU/USD chart below which is down 0.39% to $1811.41.

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The yield on the 2-year US Treasury bond rose to 1% for the first time since February 2020, while the yield on the 10-year bond touched 1.856% tonight. The US dollar also rose along with the increase in yields, so that the price of gold became more expensive for buyers with money other than US dollars.

"We are on track to increase yields throughout the year which will limit gold's gains. However, developments in inflation data may keep gold on hold," said Bob Haberkorn, analyst at RJO Futures.

Markets Await Results of Next Week's FOMC Meeting

Investors are expecting additional signals from the Fed regarding a rate hike in March. According to Haberkorn, gold prices are likely to trade in the $1780-$1830 range after the Fed's interest rates rose for the first time since the Corona Virus pandemic began. However, if the Fed raises interest rates next week unexpectedly, the price of gold could fall.

"If the Fed raises rates next week, gold will be hit by a sell-off below $1800. However, that will only be a temporary drop as markets will know the Fed is in a bad position if it raises rates before March," Haberkorn said. .

As for supporting the price of gold from the sharp decline tonight is the decline in stock indexes in the equity market. Ed Moya of OANDA said that gold is currently in a choppy phase. However, the medium-term outlook is still bullish if it can hold on to the $1800 level. Gold will also still be the favorite anti-inflation asset in Latin America and developing countries.