Saturday, 23 January, 2021


Dollar lifted as Treasury yields stabilize from drop

Gold Price Decline Pauses On Political Unrest In Washington, Stimulus Bets Dollar gives up 3-week high on profit-taking
Conrad Doyle | 13 January, 2021, 20:30

Platinum rose 0.3% to $1,079.21, while palladium eased 0.2% to $2,388.78.

In the worldwide market, Spot Gold was steady at $1,845.19 per ounce as Asian stocks traded lower (ahead of Indian market's opening), dragged by political unrest in Washington and rising global COVID-19 cases, outweighing a firmer dollar and US Treasury yields.

The action along the curve meant the spread between the 2-year and 10-year yields steepened to an nearly four-year high of more than 103 basis points.

Last week, gold prices corrected sharply on cues from the global market where traders increased their short position as seen by the open interest.

Commercial property prices fell almost 10% in 2020, according to the Green Street Commercial Property Price Index, although the hardest hit sectors saw declines of 15% to 25%.

The dollar fell through 104 Japanese yen to trade at 103.63 yen on Wednesday and the Chinese yuan also held gains to begin the day at a one-week high in offshore trade.

Investors maintained their bearish stance on the greenback.

"Higher US yields are starting to have quite a negative effect on gold and the market continues to get stopped out of a lot of positions, as they weren't prepared for these moves in the US dollar".

"Everyone's asking whether this changes the weaker dollar narrative - that's why I think we're getting a bit of a continuation of what we're seeing on Thursday and Friday", said National Australia Bank's head of FX strategy, Ray Attrill. With U.S, yields shooting higher, it really does two things: "1) it encourages more inflow into the USA buying US rate products and 2) very sharply moving yield levels tend to not be good for high beta EM FX".

Higher bond yields increase the opportunity cost of holding gold.

Several U.S. Federal Reserve officials see the economy recovering strongly if the vaccinations gather pace, but that also invokes questions about the outlook of central bank's monetary policy.

However, strong demand at a $38 billion 10-year auction overnight and remarks from Boston Fed President Eric Rosengren and Kansas City Fed President Esther George have allayed some of those concerns ahead of a busy schedule of Fed speakers.

Spot gold dropped 0.1% to $1,845.91 an ounce.

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