- Rise in Treasury yields is increasingly challenging the status-quo in markets and supporting the US dollar.
- Gold's bullish trend is being challenged as are bullish commitments.
The price of gold is sitting at $1,846 and has travelled between a range of $1,817 and $1,856 on the day.
Gold is flat towards the close on Wall Street while an aggressive rise in Treasury yields is turning heads.
US market-implied breakeven long-run inflation expectations have been trending upwards to currently sit at 2.1%, sparking speculation that inflation might be returning.
The aggressive rise in Treasury yields is increasingly challenging the status-quo in markets, analysts at TD Securities argued.
''Indeed, complacent positioning is being shaken-up as a Blue Senate forces Treasury markets to price-in a substantial increase in supply, in turn lifting rates and the broad dollar while wreaking havoc on gold.''
''The shock to positioning is reverberating, as CTAs are set to liquidate their gold length and target a net short position for the first time in months.''
''Looking on the horizon, it seems that an imminent covid-relief bill and the prospects for a substantial infrastructure package down the road should support higher inflation expectations and in turn, translate into a higher price for inflation-hedge assets.''
On the other hand, the demand outlook is still fragile as COVID runs rampant. Evidence of persistent inflation pressure could still some way off.
Moreover, the analysts at Td Securities also noted that gold is an inflation-hedge asset only inasmuch as the Fed's stance on rates translates into a low rates vol environment.
''Recent fedspeak has pushed back against the need to immediately extend the weighted-average maturity of their Treasury purchases, suggesting officials are testing the resilience of equity markets against higher rates. This argues for a different trading regime than we have operated in for the last nine months.''
Looking ahead for the week, December US Consumer Price Index data will be important.
The headline rate is expected to jump sharply (+0.4% mom) owing to firmer oil prices which could well contribute to some further weakness in the Treasury market, supporting the greenback and weighing on gold.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD eyes multi-month low on US-China trade war concerns
AUD/USD remains under heavy selling pressure for the second straight day and dives back closer to a multi-month low during the Asian session on Tuesday. Trump's threatened tariffs on China undermine the China-proxy Aussie amid a softer risk tone.
USD/JPY extends its consolidative price move around 154.00
USD/JPY remains confined in a familiar range as traders seem reluctant amid mixed fundamental cues. The uncertainty over the timing and pace of interest rate hikes by the BoJ, the recent surge in the US bond yields and the risk-on mood undermine the JPY.
Gold rebounds from one-week low; finds support ahead of $2,600
Gold price dropped to a one-week low during the Asian session on Tuesday, albeit finds some support in the vicinity of the $2,600 mark. The prevalent risk-on environment, along with bets for slower Fed rate cuts and elevated US bond yields, drives flows away from the safe-haven XAU/USD and supports prospects for further losses.
Ripple's XRP eyes $1.96 after WisdomTree files for XRP ETF in the US
Ripple's XRP surged over 7% on Monday and aims to stage a rally toward its April 2021 high after WisdomTree registered for an XRP ETF in the US state of Delaware on Monday.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.