Gold slightly higher, but pulls back from post-Fed high as Treasury yields rise

Gold futures remained slightly higher Thursday morning, but pulled back from the moe-than-two-week high seen after Federal Reserve and Chairman Jerome Powell struck a dovish tone a day earlier.

Gold for April delivery
GCJ21,
+0.16%

rose $3.20, or 0.2%, to $1,730.30 an ounce on Comex. Following Wednesday’s settlement, gold traded as high as $1,754.20, its highest since March 1. May silver
SIK21,
+0.89%

was up 22.2 cents, or 0.9%, at $26.28 an ounce.

Read: Why gold rallied after the Fed news

The Federal Reserve on Wednesday boosted its outlook for economic growth, while Chairman Jerome Powell reiterated that policy makers want to see inflation push above its 2% target, accompanied by significant improvement in the labor market, before it will begin raising interest rates or pulling back on its program of asset purchases.

“Bullion investors rejoiced in a dovish FOMC statement and presser. Gold prices surged as the dollar went into free fall after the Fed remain stubbornly dovish despite significant upgrades to their growth, inflation, and unemployment forecasts,” said Edward Moya, senior market analyst at Oanda, in a note.

Gold was hanging on to gains Thursday despite a renewed selloff in government bonds, which pushed yields sharply higher, with the 10-year Treasury yield
TMUBMUSD10Y,
1.743%

up more than 9 basis points to nearly 1.73%.

Rising yields had been a negative for gold, as they raise the opportunity cost of holding nonyielding assets, but analysts said that dynamic could shift.

“We view gold not only as a safe haven in the medium to long term, but also as a capital protection and inflation hedge, and envisage higher prices,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note.

Moya said with “easy money” not going away soon, “the bottom is firmly in place for gold. Gold prices are entering a new environment where they could start to rally alongside Treasury yields if inflation runs hot.”

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