Monday’s decline in gold prices is due to a strong increase in U.S. Treasury rates, which made the U.S. Dollar a more appealing investment. Yields increased as traders put pessimistic wagers on U.S. Treasury bonds ahead of critical U.S. inflation data later this week, which might reinforce the argument for more aggressive rate rises by the U.S. Federal Reserve.
At 18:54 GMT, Comex gold futures for August are trading at $1844.40, a decrease of $5.80 or 0.31 percent. The SPDR Gold Shares ETF (GLD) has down $0.86, or 0.50 percent, to $171.72 per share.
The yield on the benchmark 10-year U.S. Treasury note increased on Monday ahead of a busy week for U.S. economic data. The yield increased by more than seven basis points to 3.03 percent, while the yield on the 30-year Treasury bond jumped by around seven basis points to 3.183 percent.
The market movement of the previous two sessions indicates that investors are pricing in an aggressive path of Fed interest rate rises. Despite predictions of an economic slowdown and inflation running at a multi-decade high, the U.S. economy gained 390,000 jobs in May, according to a U.S. payrolls data released on Friday. This sparked the latest round of selling pressure.
Now, traders are anticipating a major inflation report expected out on Friday. May’s consumer price index (CPI) is anticipated to be somewhat lower than April’s. If the CPI figure matches forecasts, this would signal that inflation has reached its maximum level.
Even if the CPI report suggests that consumer prices have reached their top, the Fed is unlikely to ease up on monetary stimulus. The most recent Fed policy statement and remarks from numerous Fed officials indicate that rate rises of 50 basis points are expected in June and July. The decision about the interest rate in September is the biggest sticking point.
If the economy begins to decline excessively and too quickly, indicating that a recession is coming, the Fed would likely halt the pace of rate rises. If the economy, especially employment statistics, continues to show strength, the Fed will likely become more aggressive. This evaluation would maintain the pressure on gold prices.
