Gold on back foot as the US inflation concerns ease

Gold is trading around $1330, in New York session, edging down by 0.18% on the reduced concerns about the US inflation and subsequent slump in US bond yields on Friday

Global bond yields are ticking lower after comments by US policymakers’, downplaying the US inflation pressure despite wage growth. On Thursday, the US Treasury Secretary Mnuchin said that policies Trump's administration’s will raise wages without causing broader inflation.

As par Mnuchin, “There are a lot of ways to have the economy grow; you can have wage inflation and not necessarily have inflation concerns in general”. A similar view was also echoed by White House economic advisor, projected for a Goldilocks the US economy as it could grow by 3% in 2018 without boosting inflation much.

On Friday, the US Dollar got some boost amid “risk-on” narrative as the US bond yield slumps and stocks set to open higher. 

Script form Fed’s Kaplan was also on the hawkish side as he sees 3 rate hikes in 2018 as “appropriate”, but could go for more if US inflation and employment exceeds his forecast. But Kaplan is also cautious for any disorderly financial market volatility under tightening conditions and thus called for a gradual and patient removal of accommodation. Fed's Bostic also said that Fed is carefully calibrating return to more normal policy amid steady improvement in the US economy.

Gold is also under some pressure on reduced physical demand from India and China as marriage season and Lunar New Year holiday came to an end. Indian demand for gold may be also under additional pressure on anti-money laundering rules and clamp down on unaccounted money and collective gold investment schemes coupled with big bank loan frauds relating to gems and jewelry business.

Technically for gold, 1,315 area is now immediate support and sustaining below that 1,305-1,285 zones may be visible soon. For any meaningful recovery, gold must stay above 1,335-1,340 zone for 1,356-1,366 area.