Gold extends gains as US yields slip

Gold extended gains on Tuesday, as the dollar and US yields slipped. Gold climbed above $1,700 per ounce touching $1,730 per ounce. If gold prices decline, support may be found at $1,681 per ounce and further down at the 2020 low near $1,441 per ounce. Resistance may be found at around 1,740 per ounce and higher up at $1,765 per ounce.

The dollar edged lower on Tuesday, pushed down by declining US yields. The dollar index fell almost to the 110 level, while competing currencies, such as the Euro, rallied. US Treasury yields also retreated, with the US 10-year bond yield dropping near 0.36%, after reaching 15-year highs of 4.0% last week.  

Market sentiment has been uncertain in the past few weeks, causing volatility in gold prices. Renewed risk sentiment this week has driven the dollar down. Even though the safe-haven gold should be under pressure from risk-on sentiment, the decline of the US dollar and Treasury yields is providing a substantial boost to the price of gold. 

Gold prices are under pressure by the shift of most major Central Banks toward a tighter monetary policy to combat rising inflation rates. Assets yielding interest become a more appealing investment compared to gold as interest rates rise. In its latest monetary policy meeting, the US Fed raised its interest rate by 75 basis points. Rampant US inflation has raised expectations for another steep rate hike at the Fed’s next policy meeting in November, putting pressure on gold prices.

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Written by:
Myrsini Giannouli

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