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Gold Surges, Treasury Yields Fall Amid Inflationary Pressure

Gold prices surged on Tuesday after inflation pressure continued. The boost was aided by a decline in U.S. treasury yield. 

Spot gold climbed 0.69% to close at $1,853.72 per ounce. The bullion touched $1,836.10, which was the lowest since 1st June when gold futures rose 0.68% to close at $1,856.3.

Kitco Metals Senior Analyst notes,

“Gold is being supported by rising worries about inflation, which is historically a bullish element for the metals markets.”

Worth noting that bond yields and stocks around the world fell from highs of a 50-basis point rate increase in Australia. This raised concern about the policy tightening as the ECB meeting takes place this week.

Even though gold is often viewed as a hedge against inflation, an increase in interest rates pose a threat translating to the high opportunity cost of having non-yielding bullion.

Wyckoff adds, 

“Gold traders tend to read central bank meetings and monetary policy moves as a double-edged sword.”

On the same note, the U.S. treasury yields fell as risk appetite increased for safe-haven debt.

Traders are kept to observe the Inflation data expected this Friday for major clues on the Federal Reserve’s interest rate increase trajectory. As well, a half-point hike in interest rates is expected during the Federal Open Market Committee meeting to be held on June 14-15.

In a remark, T.D. Securities noted,

“The gap between gold and real rates may be attributed to both an undue rise in real rates given quantitative tightening and to the still-massive amount of complacent length being held in gold, keeping the yellow metal’s prices elevated.”

Meanwhile; Platinum fell 0.42% to close at $1,013.19 per ounce while Palladium fell 0.94% to $1,983.80 and Silver gained 0.84% to $22.24.

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Author

  • Phyllis Wangui

    Phyllis Wangui is a Financial Analyst and News Editor with qualifications in accounting and economics. She has over 20 years of banking and accounting experience, during which she has gained extensive knowledge of the forex, stock news, stock market, forex analysis, cryptos and foreign exchange industries. Phyllis is an avid commentator on these topics and loves to share her insights with others through financial publications and social media platforms.