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Bond Yield Drop Helps Gold Price Improve




  • New Weekly High For Gold
  • Recession Fears and Disappointing Data
  • Precious Metals Up All Round

Those trading precious metals, particularly gold, will hope today signals an improvement in prices. The precious metal has turned around after hitting a multi-month low earlier in the week. Among the contributing factors are that a recession in the US seems increasingly likely as was shown by more disappointing PMI numbers in both the United States and the Eurozone. This has led not only gold but other precious metals higher to end the week.

Gold Peaks Following Difficult Week

Gold price always takes center stage in commodities and precious metals news. There has been little to shout about for the traditional safe haven in recent weeks. The price against the USD traders will be hoping reached a bottom on Thursday. This saw gold move below $1700 for the first time in several months. The rebound started quickly and two positive finishes have followed to close out the week.

The most popular precious metal has managed now to climb back above the key $1700 benchmark and move quickly toward $1750 ending at a high for the week. Important data coming up next week will determine if the positive run for gold continues or if it begins to track back. The FOMC monetary policy decision will be the most anticipated of these events as the Fed tries to get inflation in check.

Poor US & EU Data Hurt Sentiment

The improvement in gold price coincides with the release of disappointing data in both the US and Europe. This has continued fears of a recession to come as the economy struggles under the weight of heavy inflationary pressure and geopolitical concerns. Falling bond yields accompanied this sentiment and creates an environment that allows gold to improve. The US 10-Year yield is now at its lowest point in more than two weeks. 

US services and composite readings led the slide downward and in turn the support for gold as a key safe haven. These readings dropped to 47 and 47.6 respectively and sparked increased fears of recession. The EU numbers were similarly poor, the composite PMI reading for July dipping to 49.4. 

Metals Moving in the Right Direction

The improvement in precious metals was not confined to only gold as it snapped a five-week losing streak. Platinum prices improved in after-hours trading as palladium jumped almost 6% to finish the day above $2,000 and well up for the week overall. Silver is the only precious metal to move lower falling below $19 to end a volatile week of trading.  

Overall, with more potential volatility to come next week when the Fed announces its policy decision, analysts may see more upward movement from gold in particular. A 75-point basis rate move is widely expected but a move of even more would not be shocking. A stronger Dollar is the only factor that may put a cap on gold and other precious metals.

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.