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Strong bond yield-driven dollar pins down gold prices

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Analysis by Golden FX Link Capital business manager Chhea Chhayheng

Strong bond yield-driven dollar pins down gold prices

Gold prices softened as rising US Treasury bond yields strengthened the greenback, making the dollar more attractive to investors.

Prices of the precious yellow metal on Monday declined modestly from $1,800 to $1,760 per ounce.

The White House on Friday announced the lifting of Covid-19 travel restrictions for fully vaccinated foreigners from November 8, which triggered a demand for jet fuel. But gold is certain to move the opposite direction, according to investing.com.

Independent forex portal FXStreet’s editor Guillermo Alcala said on Tuesday: “The increase on US Treasury bonds, fuelled by increasing expectations that Fed tapering is around the corner, has made the US dollar a more attractive refuge for inflation than gold.

“The US 10-year yield has ticked up to 1.57 per cent from 1.55 per cent on Friday, while shorter-term notes, like the five-year yield, surging to 20-month highs at 1.19 per cent as investors start speculating about the possibility of higher interest rates for 2022.”

Investing.com said: “Gold prices are projected to see further weakness after last week’s brief swing that took it above $1,800 – only to collapse within 24 hours. Last week’s minutes of the Fed’s September meeting showed that a November announcement is on the cards and tapering could even start later the same month.”

From a technical perspective, gold prices are being traded in a range of $1,760 to $1,785 – remaining firm above the $1,760 level and indicating that the market is consolidating after the $40 drop last week.

In daily charting, gold prices are moving in a downtrend, so if the price breaks below $1,760, the next drop for gold might be $1,745, an October low point, followed by $1,725, a September low point.

As a result, traders can wait for candlestick analysis confirming the $1,785 resistance zone before placing a sell order, with the take-profit function at $1,765 and the stop-loss at $1,800.

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