Despite the decline in US yields, the US dollar still appreciated. That was enough for gold to drop 0.45% to $1,845.00 an ounce. Traders are also nervous: today, gold fell another 0.40% to $1,838.00 an ounce.
The new US administration, led by President-elect Joe Biden, is expected to unveil a massive Covid-19 relief package worth about $2 trillion on Friday, citing two people who were briefed on the discussions.
His advisers recently told allies in Congress that they expect a target price of $2 trillion, up to $700 billion from the $1.3 trillion packages that Schumer requested at auction in New York late Wednesday.
The fact that gold fell is an ominous development, even though the yield on US 10-year bonds also declined. If the yield on US 10-year bonds reverses course and begins to rise again, reducing the negative pass-through in real yields, gold could experience another sustained selling spurt. A US stimulus package of $1.5-2.0 trillion may be enough to tip the scales.
Investors reduced their open interest positions by almost 4 thousand contracts on the previous day, changing the previous construction according to preliminary data from CME Group. On the other hand, the volumes changed two drops in a row and increased by almost 4.9 thousand contracts.
The negative behavior of gold prices on the previous day was caused by a reduction in open interest, which robbed some of the forces of a deeper pullback and made possible further consolidation shortly.
In the above report, gold quickly dropped by about $20 to $1,832 as the sell-off in US Treasuries triggered a 2% jump in 10-year Treasury yields, triggering a new rebound in the US dollar index.
The yellow metal is currently gaining momentum as market participants await Powell’s Fed speech. The recent rise in US bond yields and speculation about what the central bank will do in the next meeting make Powell’s words more interesting.
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