Gold futures are trading lower on Thursday but slightly better than a nine-month low reached the previous session. However, rising U.S. Treasury yields continue to spook buyers of the non-yielding commodity.
The relatively low volatility this week suggests traders may be trying to build a support base at the lower end of a long-term retracement zone, but another lower-low in the chart pattern suggests sellers are still a dominant force. Prices are likely to continue lower until the buying is strong enough to take out one or a number of its current string of lower tops.
In other words, instead of buying new lows, which only slows down the selling, investors are going to have to step up and take out offers or buy strength. This is not likely to occur unless the U.S. Dollar starts to resume it downtrend or yields start to come down.
At 09:15 GMT, April Comex gold is trading $1708.90, down $6.90 or -0.40%.
Rising Yields Weighing on Demand
Higher U.S. Treasury yields threaten gold’s appeal as an inflation hedge as they increase the opportunity cost of holding bullion, which pays no returns, while the dollar rose against rivals, according to Reuters.
U.S. Treasury yields climbed on Wednesday as investors cheered positive news on the vaccine rollout. The U.S. 10-year Treasury yield sat around 1.47% on Wednesday, after popping to 1.61% last week. The surge in bond yields is supporting the U.S. Dollar which is weighing on foreign demand for the dollar-denominated asset.
Traders are expecting heightened volatility in the gold market the next two trading sessions. On Thursday, they’ll get a chance to react to comments from Federal Reserve Chairman Jerome Powell who speaks at a virtual Wall Street Journal Jobs Summit at 17:05 GMT.
Gold investors are anxious to see if Powell expresses concern about a recent volatile sell-off in Treasuries and if there is any change in his assessment of the economy before the Fed’s next meeting ending March 17.
On Friday, the U.S. will release its latest its February Non-Farm Payrolls report. The numbers are expected to drive strong movement in Treasury yields.
For a look at all of today’s economic events, check out our economic calendar.