Gold runs out of steam on high Treasury yields

2024-01-11
Summary:

Gold at $2,030, anticipating US inflation data, supported by a weaker dollar. It marked its first weekly decline in four weeks.

Gold prices languished around $2,030 on Thursday ahead of US inflation data although a softer dollar kept a floor under prices. They just posted their first weekly decline in four weeks.

A New York Fed report revealed that consumers expect a decline in inflation, while Michelle Bowman on Monday stated that the monetary policy seems "sufficiently restrictive".


In 2024, gold performance could be lacklustre and any upside may depend on continued central bank demand which was the primary influential drivers of bullion’s rally last year, according to the WGC.


It added, in the near term, a tug-of-war between historically positive January seasonality and some pushback against the dovish sentiment that drove prices to all-time-highs in Dec is likely.


Most market participants in a recent Reuters poll of strategists said the dollar will slip against major currencies in 12 months. Meanwhile 10-year Treasury yield is still trading above a high of 4%.


The former bond king, Bill Gross, says 10-year Treasury is “overvalued” and TIPS is a better choice. If his prediction turns out to be correct, that would dent the appeal of holding the interest-free metal.

XAUUSD

Gold lost its shine heading into 2024, with the 50 SMA providing solid support. It lacks discretional strength at the moment and $2040 could be the handle to clear for a more bullish bias.


Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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