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US bond and dollar yields strengthened yesterday, making precious metals less attractive.
In the March 18 session, each global ounce of spot gold sometimes fell by nearly $ 27 compared to the start of the day, to $ 1,718. Prices start to drop in the afternoon and accelerate as the afternoon session enters the United States. The reason is that US bond yields increased and the dollar strengthened, causing the demand for safe havens of precious metals to decline.
However, the market then reversed and closed down just $ 9 to $ 1,736 per ounce.
Movements in world gold prices in recent sessions.
“The main challenge for gold now is that US bond yields are skyrocketing. This is also a sign that the bond market is losing confidence in the ability of the US Federal Reserve (Fed) to stand up. poised to deal with inflation, “” But this really benefits gold in the long run, “said Carsten Fritsch, an analyst at Commerzbank.
The yield on a 10-year US government bond increased to 1.74% for the first time since January 2020. Meanwhile, the US dollar rose 0.3% compared to other major currencies.
Yesterday morning, the price peaked in 2 weeks at $ 1,755. The Fed said the US economy is on track to post the fastest-growing year in nearly 40 years. However, this agency undertook to maintain a policy of monetary relaxation, despite inflationary pressures.
Gold is considered a hedge against inflation. However, higher US bond yields make gold less attractive, as precious metals do not pay fixed interest. “The Fed is becoming increasingly bullish. This is not in favor of gold. The downtrend is likely to continue,” said Ilya Spivak, currency strategist at DailyFX.
Ha Thu (Theo Kitco, Reuters)
