Daily Market Recap – GOLD Rising yields are hammering gold prices 28

The yellow metal is losing ground, suffering once again from the accelerated rise in bond yields in the face of renewed concerns about inflation and interest rates.

Jerome Powell did not reassure Wall Street on Tuesday at a virtual Fed conference on the post-pandemic recovery. He observed an improvement in the labor market and the strengthening of the economy, nevertheless, persistent shortages are hampering growth. He also estimated that rising prices and hiring difficulties could prove “more persistent than anticipated” and that the Fed would retaliate if necessary to inflation.

At the same time, Janet Yellen warned of a risk of default on US debt for the first time in history if the budget deficit ceiling is not raised by October 18.

Fears over inflation and rates are adding to concerns about China, from the still uncertain future of real estate giant Evergrande to power shortages that are weighing on economic activity.

The U.S. bond market continued to a selloff for the fourth straight session, keeping yields on the rise. The yield on 2-year Treasuries rose to 0.3147%, its highest level since March 2020, the 5-year rose above 1% for the first time since February 2020, and the 10-year is up more than six basis points to 1.5444% after reaching its highest level since June at 1.561%.

From a technical perspective, the price of gold had been digging at the support for several sessions at 1,750 dollars. However, the break of this level seems to confirm the continuation of the decline in the coming days.

In the medium term, prices are evolving within a bearish channel, so an acceleration towards the lower bound should not be excluded. Moreover, the polarity zone around $1,690/$1,680 is a major threshold for the future. Indeed, the market has come to support this level several times before rebounding.

 (Chart Source: Tradingview 28.09.2021)

To sum up, a sell-off seems to be taking place and the macroeconomic outlook does not benefit the yellow metal in the current context. Chart analysis suggests a deeper correction ahead, so it will be wise to wait for a return to the $1,680 area before attempting to buy on the cheap.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.