Gold Sinks Anew on Stronger Dollar and Higher Bond Yields

Gold charts

Gold prices fell again on Wednesday on firm dollar and higher U.S. Treasury yields. The greenback rose to near its 2021 peaks and made the yellow metal more expensive for investors using rival currencies. The benchmark 10-year yields hit their highest levels since June, which raised the opportunity cost of owning the non-interest-bearing bullion.

Spot gold is currently trading at $1,747.89 per ounce as of 0841 GMT.

The market remains focused on the U.S. non-farm payrolls data due on Friday. The report would have a significant influence on the Federal Reserve’s tapering timeline. Economists forecast the addition of 488,000 jobs in September.

IG Market analyst Kyle Rodda said monetary policy expectations tilted the bullion’s price momentum downward. OANDA senior market analyst Edward Moya added that the jobs report could be a game-changer for gold prices. He expected the bullion to trade between the $1,745 and $1,775 range.

On the technical front, DailyFX senior strategist Christopher Vecchio noted that gold continues to have lower highs and lower lows. He suggested that the rising inflation is one of the main factors against the bullion because it pushes Treasury yields higher.

He mentioned the persistent negative relationship between gold volatility and prices, which indicates difficult trading conditions. The five-day correlation between gold volatility and prices is -0.70. It even went as low as -0.84 on September 28.

Vecchio argued that investors would likely be in the “selling the rally” mode. It is because the MACD continues to fall beyond the signal line. Data also shows that 72.86% of traders are net-long, which suggests that bullion prices may continue to go down.

Meanwhile, the Institute for Supply Management reported that its non-manufacturing activity index rose to 61.9 in September. Like other sectors, the services industry is struggling with raw material and labor shortages that resulted in higher prices. But the September index beat economists’ forecast of a decline to 60.

In a related development, National Bank of Poland President Adam Glapiński proposed to buy additional 100 tons of gold in 2022. The central bank had more than 230 tons as of September. But he said they need to increase their gold holdings to improve the country’s financial security.

The Perth Mint, one of the world’s biggest gold producers, reported that its sales of gold products rose by 83% in September. It sold 98,753 ounces of gold coins and minted bars, which was 57.6% higher than a year earlier.