Gold Gains But Stronger Bond Yields, Positive Economic Data Pressure
Arslan Butt • 1 min read
Gold prices are on the rise in early trading on Monday as traders once again turn their focus towards fears of a spike in inflation; however, gains remain limited over a strengthening in US Treasury yields and the dollar. At the time of writing, GOLD is trading at a little above $1,724.
The benchmark 10-year US Treasury yields surged to over 1.62% earlier in the session, closing in on Friday’s high above 1.64% amid worries of the impact of President Biden’s latest $1.9 trillion COVID-19 relief package. Even as the latest round of stimulus measures will help the US economy recover at a faster pace, there are increasing concerns that, coupled with Fed’s plans for extended monetary easing and low interest rates, the pace of recovery could be too much too soon.
Gold is trading bullish as a result of this sentiment as the precious metal is typically considered as a hedge against inflation. However, the spike in treasury yields is keeping a lid on the yellow metal’s bullishness as higher bond yields increase the opportunity cost of holding non-yielding bullion among investors.
Optimistic economic data releases from the US and China recently are also keeping gold’s gains in check. While the US PPI surged to the highest level in over two and a half years even as new unemployment claims among Americans touched a four-month low, China reported a surge in its industrial production and retail sales, supporting expectations that economic recovery following the coronavirus pandemic is progressing on a strong note.