Gold touched almost $4,700 an ounce on Tuesday, its highest level since mid-May, before easing to trade at $4,649. The rally comes as traders worry about US inflation and jitters in the bond market, a week after the Treasury moved to calm a sharp rise in yields.
Gold touched almost $4,700 an ounce on Tuesday, its highest level since mid-May, before giving back some gains to trade at $4,649 an ounce. The advance tracks growing investor unease over US inflation and the bond market.
Treasury debt purchases sparked the move
Prices jumped last week after the US Treasury Department said it would double its debt purchases of longer-dated bonds, moving to calm the bond market after a sharp rise in yields. Gold had already cleared the $4,530-an-ounce technical resistance level last Friday, according to Ipek Ozkardeskaya, senior analyst at Swissquote.
According to Ipek Ozkardeskaya, senior analyst at Swissquote: "Renewed appetite for gold despite elevated long-term US yields is striking". She said the metal is acting as a hedge against unclear US fiscal plans and against questions over the Federal Reserve's willingness to fight inflation on its own.
Fed speech and inflation data next test
Traders are now watching for fresh US inflation data and a speech by Federal Reserve chair Kevin Warsh on Friday for clues on interest rate hikes. Ozkardeskaya said a broader de-dollarization trade, with institutions diversifying away from US Treasuries and toward gold, remains supportive in the longer run.
However, she cautioned that overbought conditions could bring short-term corrections, even as she said gold's momentum could possibly carry it back above $5,000 an ounce.
Source: The Guardian
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