Gold prices drifted slightly lower at the first trading session of the week after U.S. Treasury yields soared to their highest in nearly 11 months in the previous session.
At the time of drafting this report, spot gold was trading lower by 0.1% to $1,821.84 per ounce.
Gold traders are becoming increasingly wary as U.S. Treasury yields surged to their highest levels since March 2020 at the end of last week’s trading session, though U.S inflation expectations ticked up to a six-year high.
What you must know: Usually, higher inflation boosts the price of the precious metal in principle, but also helps U.S Treasury yields (gold’s arch-enemy), which in turn helps the opportunity cost of holding the safe haven shinny asset.
Stephen Innes, Chief Global Market Strategist at Axi, gave further insights on the political macro condition that could determine the precious metal future, at least for the midterm knowing fully well that gold is priced in the U.S dollar.
“Gold came close to breaking back below USD1,800/oz. A second break below that level this month would have done some psychological damage to the market, I believe.
“On the political side, President Biden’s incentives look fully aligned with getting the US economy and populations as healthy as possible ahead of the 2022 mid-term elections.
“If both fiscal and monetary policy makes maximum efforts into a post-pandemic recovery, then at the very least we will get temporary inflation along with plenty of debate whether it might become more permanent.”
Gold traders are not keen on going long, at least for the near term, on the bias that rising U.S Treasury yields see investors showing less interest in the yellow metal.