Gold drops to 4-month low

  • Gold continues to lose height amid curve flattening.
  • Tax reform could boost USD.

Gold (XAU/USD) hits a four-month low of $1256. 08 today as yield curve continues to collapse on speculation that tax reform would open doors for faster Fed rate hike bets.

As of writing, the metal is trading at $1258/Oz levels.  

The treasury yield curve as represented by the spread between the 10-year yield and the 2-year turned flattest in a decade yesterday. The yield curve flattening is the result of the 10-year yield's repeated failure to hold above 2.4 percent and resilience in the 2-year yield.

The recovery in the dollar index from 92.83 (Nov, 27 low) to 93.64 could have also played a role in pushing the metal down to a four-month low.

Ahead in the day, the metal could take cues from the treasury yields. Tomorrow's non-farm payrolls report and wage growth numbers could yield big move in the yellow metal.

Gold Technical Levels

A sustained move above $1260 (Oct low, now a resistance) could yield a break above $1264 (daily high) and a move higher to $1269 (5-day MA). On the downside, breach of support at $1254.16 (Aug. 4 low) could yield a sell-off to $1249.94 (Aug. 8 low) and $1240.79 (Jun. 21 low).

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