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Gold futures were little changed on Tuesday morning ahead of a policy update from the Federal Reserve due Wednesday, which could set the tone for financial markets over the next few months.
Gold for August delivery
GCQ21,
GC00,
was up 80 cents at $1,886.80 an ounce, following a 0.7% decline on Monday to the lowest finish since May 14 for the most-active contract, FactSet data show.
Bullion traders may be wary of the possibility that the Fed could signal that it is mindful of growing inflation measures and could hint at a plan to scale back asset-purchases and eventually raise interest rates, as the U.S. economy stages a recovery from the COVID pandemic, said Marios Hadjikyriacos, investment analyst at XM.
Pressure on bullion this week has come as Treasury yields have gained slightly, with the 10-year Treasury yield
TMUBMUSD10Y,
at around 1.50% on Tuesday.
“US Treasury yields have bounced back from their recent lows, suggesting that some players are wary of the Fed signaling it is thinking about talking about tapering soon. Gold is in this camp too, with the precious metal struggling for altitude lately,” Hadjikyriacos wrote.
Gold prices are down 1.5% so far in 2021 and have struggled to sustain altitude above $1,900 in recent trade.
Treasury yields have been relatively subdued and the fact that gold hasn’t been able to climb substantially higher in that environment raises concerns for bulls, Ipek Ozkardeskaya, senior analyst at Swisswote, said.
“If the combination of subdued yields and high inflation couldn’t bring gold bulls to the party, then there’s more interest in riskier and better-rewarding assets,” the analyst said.
