Yesterday, Thursday was a bad day for gold as spot prices (XAUUSD) made their biggest drop since the 8th January to fall from $1830 to $1785, a drop of over 2% on the day, the first time the precious metal had fallen below this psychological level since November 2020. The 18th of January low at $1802.95 will likely offer some resistance if the yellow metal manage to reach $1800.
The current market conditions have not been favorable for gold as the US dollar has been going up for most of the week. US equity markets and crude oil have grown steadily all week. A strength in these risk assets is typically not great for safe-haven gold. In the meantime, yields have been going sideways and the US yield curve has been steepening as typically falling real yields are needed to pump gold prices higher.
Given, the inflation expectations have soared, which would typically be a gold positive, but this move higher seems to be being driven by strong US data and US stimulus optimism and pandemic optimism, all of which seems to suggest that the market might have already seen the Fed reach peak dovishness.
If this positive news led the Fed to start tightening monetary policy a little earlier than expected, real yields will rise, and gold could be pounded. Fears such as these appear to be keeping precious metals on the defensive for now.
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