Gold fell 1.7% on Wednesday and is trading around $4,290 per ounce as a four-session dollar rally and surging Treasury yields hit the metal. Strong US economic data and a hawkish Fed tone are driving the moves, with swaps now pricing at least three more rate hikes by April.
The dollar and yields turn on gold
Gold took a hit overnight as higher US yields and a resurgent dollar weighed on the metal. The dollar index has risen for four straight sessions, and Treasury yields keep pushing higher.
Bullion held onto its negative correlation with oil even as Brent crude pushed higher on renewed Hormuz risk. But it was the yield and dollar side of the equation that did the damage to gold, not the oil relationship.
Strong data feeds a hawkish Fed
US activity data has run hotter than expected. The S&P Global composite PMI jumped to 58.4, its strongest reading since 2021. Meanwhile, five-year Treasury yields punched through 5% for the first time since 2007. Fed official Michael Barr kept the central bank's hiking bias alive, and swaps are now pricing at least three additional hikes by April.
For a zero-yielding asset like gold, that combination is a hostile backdrop. Therefore the yield and rate-expectations move has become the dominant driver behind gold's price action.
Where gold stands now
Gold fell 1.7% on Wednesday and is hovering around $4,290 per ounce this morning. One Investing.com analysis described bullion as having become a high-frequency referendum on the US rates path, and said it was nibbling at the dip while waiting for a sturdy shift back through $4,300-15 to confirm a first-level positive momentum swing.
The same analysis said gold probably needs the rates market to stop shouting before it can listen to fiscal strain again.
Source: Investing.com
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