Gold prices extended its bearish momentum into a second day this Monday, hovering within close vicinity of multi-week lows reached previously at 1310 levels.
The bullion quickly reversed a spike to 1323 highs post-Tokyo open and fell sharply to hit daily lows at 1313.46, as the Asian equities rallied to near nine-month tops, fuelling the demand for risky assets at the expense of safe-haven gold. Thereafter, the metal attempted recovery back towards 1320 region, in response to a subdued trading activity seen in the greenback against its major rivals. At the moment, gold now wavers around 1317 levels, down -0.40% on the day.
Today’s price-action in the yellow metal is mainly driven by rising US treasury yields and persistent risk-on market profile, as markets expect the Fed to turn out slightly less dovish/more hawkish at its Fed policy meeting commencing tomorrow. Moreover, markets also continue to speculate over a Sept Fed rate hike, given the recent series of upbeat US fundamentals.
The CME Fed Watch tool that tracks the Fed funds futures, on which traders bet to gauge the direction of US interest rates, showed 15% odds for a Fed rate increase by September from the current target range of 0.25%-0.50%, while probability for a Dec rate hike stands at 38.5%. The bullion tends to suffer in a high-interest environment as it is a non-interest bearing investment asset.
While the volatility index (CBOE VIX), which gauges the risk sentiment, rallies +5.50% to 12.70 levels, indicating that risk-on persists in full swing. This is well evidenced by higher treasury yields across all time horizons and rallying European equities. The 2-year treasury yields, which mimics the US interest rates expectations, rises +3.42% to trade around 0.730 levels.
All in all, markets believe that more downside remains in store for the bullion as investors’ confidence gets re-stored amid fading Brexit concerns, a less dovish Fed and upbeat US economic releases.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.