Gold Prices Slip with Bond Yields Rise
On Wednesday, Gold futures headed lower. They hovered around the unchanged mark, alongside a rise in bond yields and the USD weighing on precious metals.
The moves come ahead of a highly anticipated speech from Federal Reserve Chairman Jerome Powell. He is expected to provide a more accommodative signal. That is, the U.S. central bank is willing to embark upon an unconventional way of thinking about rising inflation.
Powell is expected to advocate for a so-called asymmetric inflation target. This is a strategy that allows policymakers to let inflation rise above their traditional annual target of 2%. This could be seen as bullish for gold and other precious metals.
The Fed Chairman is expected to conduct a webcast speech on Thursday morning at the Jackson Hole symposium. It is being held virtually due to the pandemic.
Fawad Razaqzada, a market analyst at ThinkMarkets, wrote, he is expecting dovish rhetoric from Jay Powell and other central bank heads.
He wrote that, if he is correct, then yields and the dollar should resume lower. This in turn will likely support gold and silver, he added.
A Rise in Yields Increases the Relative Cost of Owning Gold
Commodities news reports that December gold GCZ20, 0.70% GC00, 0.70% was off $6, or 0.3%, at $1,916.10 an ounce. This was after declining 0.8% on Tuesday to market the lowest settlement for a most-active contract since July 24. This was according to FactSet data.
Trading in the precious metal comes against the backdrop of government bond yields that had been rising. Prices fell, with the 10-year Treasury note TMUBMUSD10Y, 0.699% rate up 3.5 basis points at 0.71%, according to FactSet data.
The dollar also showed signs of firming, rising 0.3% at 93.250. This was gauged by the ICE U.S. Dollar Index DXY, 0.03%.
A rise in yields can increase the relative cost of owning gold. It doesn’t offer a coupon over so-called risk-free Treasurys and a stronger buck can make a dollar-priced bullion more expensive.
Meanwhile, gold has been volatile in recent weeks, recording its all-time high on August 6, 2020. That was before losing around 4.7% in a single day.
So far, it has managed to hover between $1,915 and $1,950. On August 26, 2020, gold managed to hold its weaker tone through the Asian and mid-European sessions.
It was last recorded to be somewhere near the lower end of its daily trading range in the $1,915-17 zone.
