(Kitco News) - Commerzbank commodities analyst Carsten Fritsch has been looking at gold being under pressure due to rising U.S. yields in the bank's latest report.
He noted that "The gold price has dropped to $1,740 per troy ounce this morning, which puts it back at the level it reached last week following the Fed’s meeting. Gold had already shed its initial gains again during the course of trading yesterday. The price slide is continuing today. A headwind for gold is being generated above all by steeply rising US bond yields. Ten-year yields are now at 1.54%, their highest level in three months."
He added that "They were still around 20 basis points lower just a week ago. Because market-based inflation expectations have increased only marginally at the same time, the rise in yields has led to noticeably higher real yields. Admittedly, they are still unequivocally in negative territory, at -0.87%, yet early last week they were still at -1%, and at -1.05% two weeks ago. According to Bloomberg, the increase in yields has also caused the volume of bonds with negative yields to decline to $13.55 trillion. The last time it was any lower was at the beginning of July – and a week ago it was still $14.9 trillion, while the figure in August still exceeded $16 trillion."
Fritsch went on to say this means "Gold has therefore become less attractive relative to bonds. This is also evident in the renewed outflows of 4.5 tons from the gold ETFs tracked by Bloomberg. Furthermore, the USD has been further appreciating over the past few days, which is adding to the pressure. Market participants appear to expect earlier rate hikes to be implemented by the US Federal Reserve. According to the Fed Fund Futures, a rate hike by the end of next year is now fully priced in."
Lastly, he said "The fact that two regional Fed presidents have announced their resignation has so far done nothing to change this assessment either, even though both were in the hawk camp and favored earlier rate hikes. Clearly, it is assumed that their successors – who will be appointed by the respective regional Fed branches – will hold similarly hawkish views. What is more, the regional Fed presidents, apart from the representative of the New York Fed, have only partial voting rights.".
Gold is trading 0.45% higher on Wednesday at $1742/oz. The price is not currently near the consolidation low of $1676.91/oz but is looking slightly bearish on the daily chart. The next resistance could be at $1764/oz and the next major support is at the aforementioned consolidation low. This afternoon there are some key speakers to look out for. Notably ECB President Christine Lagarde and Federal Reserve Chair Jerome Powell. Any sign that tapering or rate hiking cycles could be slower than expected could support the precious metal.
https://news.google.com/__i/rss/rd/articles/CBMiZmh0dHBzOi8vd3d3LmtpdGNvLmNvbS9uZXdzLzIwMjEtMDktMjkvQ29tbWVyemJhbmstZGlzY3Vzcy10aGUtZWZmZWN0LXlpZWxkcy1oYWQtb24tZ29sZC10aGlzLXdlZWsuaHRtbNIBAA?oc=5
2021-09-29 09:18:00Z
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