Gold prices suffered their fifth straight day losses, putting the safe-haven asset on course for the worst losing run in almost a year, as U.S Treasury yields gained momentum, implying that the world’s largest economy is recovering from the COVID-19 pandemic’s impact.
At the time of writing this report, Gold futures traded at $1,789.40, falling below the $1,800 mark. With the prevailing situation of record losses, it would be gold’s worst run since March 2020, following its 1.3% drop on Tuesday.
Gold bears are taking a grip of the precious metal market, on reports that show significant progress on the COVID-19 vaccine front. The slowing pace of COVID-19 infections is driving hopes over global growth, thereby boosting the U.S yields.
Stephen Innes, Chief Global Market Strategist at Axi, gave further insights on the political macro condition that could determine the precious metal’s future, at least for the midterm, knowing fully well that gold is priced in the U.S dollar.
“Gold broke 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.”
Bottom Line: Much of the gold market’s current woes are attributable to rising US yields. With the pace of US vaccinations accelerating, continued signs of recovery are beginning to give the bond market jitters about inflation/taper and issuance profile for the rest of the year.