Gold edges higher as bond yields sink

Gold prices inched higher on Tuesday, touching $2,000 per ounce. If gold prices increase, resistance may be encountered near $2,015 per ounce, while if gold prices decline, support may be found near $1,970 per ounce. 

The recent crisis in the banking sector caused risk sentiment to plummet, raising the appeal of safe-haven assets. With stability returning to the banking sector, however, safe-haven assets are starting to lose their appeal as an investment.

Gold prices have been predominantly directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. Gold prices rose slightly on Tuesday supported by weaker US treasury yields, even as the dollar showed signs of recovery. The dollar rallied on Tuesday, with the dollar index climbing to the 101.9 level. US Treasury yields on the other hand dipped, with the US 10-year bond yielding approximately 3.39%.  

The Federal Reserve raised interest rates by only 25 basis points at its meeting in March, bringing the benchmark interest rate to a target range of 4.75% to 5.00%. There is a lot of uncertainty and speculation on what the Fed is going to do at its next meeting in May. Market odds currently favor another 25-basis point rate hike rather than a pause in rate hikes. Increases in central banks’ interest rates put pressure on gold prices since assets yielding interest become a more appealing investment compared to gold as interest rates rise. 

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Written by:
Myrsini Giannouli

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