Gold drifted below the $1,800 price level at the fourth trading session of the week due to higher U.S. Treasury yields. Also, U.S. Federal Reserve Chairman, Jerome Powell, maintained that the current ultra-easy monetary policy paused buying pressure on the yellow metal’s appeal.
At the time of writing this report, the blinky metal at the futures market was trading at $1,796.40 per ounce.
What you need to 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.
The U.S Fed Chief recommitted to getting the world’s largest economy back to full employment during his testimony before the House Financial Services Committee.
He tried calming fears about inflation in the $20 trillion powered economy, emphasizing that he would only start worrying about it if prices began to rise in an aggressive and troubling way.
Benchmark U.S. Treasury yields are currently at the highest levels in a year.
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. Such a break below that level this month has 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 bullish, at least for the near term, on the bias that rising U.S Treasury yields see investors showing less interest in the yellow metal.
By Olumide Adesina