Gold price is trading up from yesterday as the U.S. traded on a corrective and short-covering rebound on Monday after dropping sharply last week and made hit of five-week low on Friday.
The market sentiment continues to move indicating about inflation prospects after the previous week’s hawkish monetary policy tone from the Federal Reserve. Many economic indicators are pointing towards stronger potential for higher inflation creating problems but one major indicator does not: U.S. Treasury yields.
The yield on the benchmark U.S. 10-year Treasury note is fetching 1.43% Monday morning. Which is lower than the yield on the 10-year note that was seen prior to last Wednesday’s FOMC meeting results. Mean while the greenback has gained sharply since the Fed last week flagged sooner-than-expected interest rate hikes, but dipped on Monday to hand back a little bit of that rise.
Gold market is also finding some support from the European Central Bank (ECB) as its president Christine Lagarde repeated that the central bank’s stance that it is not ready to think on tightening its monetary policy anytime soon. Testifying before the European Parliament’s Committee on Economic and Monetary Affairs, Lagarde said that the ECB will continue to maintain its ultra-loose monetary policies as it is prepared to see through current inflation pressures.
Elsewhere, Many gold analysts have been getting excited about the prospect of strong physical demand coming to the v market as banks holding the precious metal will have to meet new funding ratio requirements under the Basel III agreements. In the medium term, investors will be keenly focused on the U.S. labour market as its performance is likely to have an influence on the Fed’s attitude. In the nearer future, all eyes are on Powell who appears before Congress from 1800 GMT.
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