Gold: Weaker near $ 1330 amid rising Treasury yields

Gold futures on Comex trade on the back foot on the first trading day of a new week, having booked first weekly loss in six last week, as rising Treasury yields on the Fed rate hike prospects continue to pressure the non-yielding yellow metal.

Gold supported above 20-DMA at 1325.45

The yellow metal came under fresh selling pressure in Asia, as markets somewhat shrugged-off the US government shutdown fears after headlines hit the wires that the stopgap vote is now scheduled for Monday noon, which helped the US dollar to recover ground against its main competitors. The USD index recovered most losses and now looks to regain the 90.50 barrier, extending its recovery from three-year troughs of 89.96 reached last Friday.

The bears also remain in control amid the recent upsurge seen in the US Treasury yields, especially in the wake of rising March Fed rate hike expectations, with markets pricing in a 70% chance of a March Fed rate hike. The 10-year US Treasury yield is trading at 2.66%, well above the levels seen on Friday, up 1% so far.

However, the downside in the precious metal is expected to remain limited amid the evidence of increasing confidence in gold, as reflected by the latest US CFTC COT reports that showed Hedge funds and money managers raised their net long position in COMEX gold contracts in the week to Jan. 16. Meanwhile, Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.70 percent to 846.67 tonnes on Friday from Thursday.  

Looking ahead, gold traders will watch for further political developments in the US ahead of this week’s key US durable goods and advance GDP releases.

Gold Technical Levels

Eren Sengezer, Analyst at FXStreet noted, “The initial support for the pair could be seen at $1324/22 (Jan. 19 low/Jan. 12 low) ahead of $1308 (Jan. 10 low) and $1300 (psychological level). On the upside, resistances align at $1344/45 (Sep. 5 high/Jan. 15 high), $1350 (Sep. 7 high) and $1358 (Sep. 8 high).”