Gold is slipping lower, although it is holding up well in comparison to the USD’s recent highs

 

So far, the gold price has remained unchanged for the day as markets consolidate the upward. The gold price is currently trading at $1,978 and has been in a tight range between $1,974.93 and $1,979.01 so far. In addition, the US dollar was strong against most currencies, particularly the yen. The DXY index hit a new two-year high of 100.953.

On Tuesday, the benchmark US 10-year Treasury yield was barely below the three-year high of 2.884 percent set on Monday, while the Bank of Japan intervened to keep the yield on Japanese 10-year government bonds around 0% and no higher than 0.25 percent. This is bolstering the dollar’s support and possibly putting a stop to gold’s rise.

Officials from the Federal Reserve have made more hawkish comments, reinforcing expectations for faster policy tightening in the United States. They began to pour in from New York Fed President John Williams, who said last week that a half-point rate hike next month is “a very feasible prospect,” signaling that even the most conservative policymakers are on board with quicker monetary tightening.

Meanwhile, Fed member James Bullard spoke on Monday and provided additional insight into the Fed’s policy outlook. Bullard is one of the bank’s most hawkish officials, predicting that interest rates will hit 3.0% this year.

Bullard stated at a virtual event hosted by the Council on Foreign Relations that “what we need to do right now is get swiftly to neutral and then move from there,” adding that he doesn’t expect to need to raise rates by more than half a percentage point at any meeting. He stated that even with aggressive rate hikes, the unemployment rate can continue to decline, reiterating his prediction that unemployment, currently at 3.6 percent, will fall below 3 percent this year.

All of this comes ahead of Fed Chair Jerome Powell’s speech later this week, in which he is anticipated to reaffirm expectations for a 50 basis point rate hike at the next Fed policy meeting. As a result of this view, the US rate futures market has priced in a 96 percent possibility of a 50 basis-point tightening at the Fed’s policy meeting next month, as well as around 215 basis points in cumulative rate increases in 2022, giving the dollar plenty of support.

According to the renowned news agency estimates and US Commodity Futures Trading Commission data released on Friday, speculators’ net long bets on the US dollar declined for the second week in a row. For the week ending April 12, the net long dollar position was worth $13.22 billion. Meanwhile, gold prices have risen to a five-week high in response to the dollar’s strength and fears of more penalties. “The growing potential of a European Union gas embargo could keep inflation high, increasing gold demand as an inflation hedge, “according to ANZ Bank analysts. “ETF flows were strong, with total holdings reaching a 14-month high of 106.6 million ounces,” according to the report.