Commodity Market: Gold extends losses as US Dollar rebounds with higher US bond yields

Spot Gold extended losses from the previous two trading days on Friday, pressured by a stronger US Dollar and rising US bond yields.

The yield on US 10-year government bonds rose to levels not seen since March 2020, while maintaining ground above 1%.

“In the short term, we just seem to lack a catalyst to drive prices higher,” IG Market analyst Kyle Rodda was quoted as saying by Reuters.

“The effect of (fiscal stimulus hopes) has driven up inflation expectations, (but) we’re starting to see nominal bond yields climb as well, which is reasonably significant for gold.”

A stronger US Dollar tends to make Gold more expensive for international investors holding other currencies, while higher bond yields lead to higher opportunity cost of holding the precious metal.

As of 10:20 GMT on Friday Spot Gold was losing 1.08% to trade at $1,892.89 per troy ounce, after earlier touching an intraday low of $1,877.74 per troy ounce, or its weakest price level since December 30th ($1,876.20 per troy ounce). The yellow metal has dipped 0.32% so far in January, following a 6.84% surge in December, or its best performance since July.

Meanwhile, Gold futures for delivery in February were retreating 1.11% on the day to trade at $1,892.30 per troy ounce, while Silver futures for delivery in March were down 2.39% to trade at $26.610 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging up 0.18% to 89.98 on Friday, while rebounding from more than 2 1/2-year low of 89.21, registered earlier this week.

In terms of macroeconomic data, today Gold traders will be paying attention to the December report on US Non-Farm Payrolls due out at 15:30 GMT.

Additionally, a Federal Reserve official is expected to make speech at 18:00 GMT.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of January 8th, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on January 26th-27th, or unchanged compared to January 7th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,916.10
R1 – $1,925.22
R2 – $1,936.84
R3 – $1,945.96
R4 – $1,955.08

S1 – $1,904.47
S2 – $1,895.36
S3 – $1,883.73
S4 – $1,872.10