This post was originally published on this site
Gold contracts on Wednesday were trading slightly lower, a day after Federal Reserve Chairman Jerome Powell tried to placate markets that had grown skittish about a rapid rise in bond yields as the economy attempts to recover from the COVID-19 pandemic.
Some commodity dealers said the outlook for gold remained precarious as the asset has been under pressure for weeks but bullion bulls argue that the prospects for the yellow metal are upbeat given the expectations for further fiscal spending from the U.S. government and a long recovery for the labor market from the pandemic.
“Gold is still in the danger zone since Powell did not deliver a response to the recent surge in yields,” wrote Edward Moya, senior market analyst at Oanda, in a note.
“Treasury yields can probably go a lot higher before the Fed will step in and that could derail gold’s outlook in the short-term,” he wrote.
Indeed, a surge in bond yields, pushing the 10-year Treasury note TMUBMUSD10Y, 1.401% to around 1.40%, has forced investors to rethink the benefit of owning gold, which doesn’t over a coupon against government bonds, which are perceived as risk-free, safe-haven assets.
Powell on Tuesday emphasized the Fed’s commitment to keeping easy monetary policies unchanged for the foreseeable future, which helped stem heavy losses among tech companies, a group of companies that tend to be the most sensitive to rising rates and are also seen as richly valued.
After delivering testimony on Tuesday to the Senate Banking Committee, Powell will deliver his second day of remarks about the state of the economy and market later Wednesday to a House committee.
Against that backdrop, gold prices GC00, -0.94% GCJ21, -0.94% were trading $10.50, or 0.6%, lower at $1,794.90 an ounce, after the precious metal declined by about 0.1% in the pervious session.
Meanwhile, March silver SI00, -0.50% SIH21, -0.50% shed 9 cents, or 0.3%, to trade around $27.60 an ounce, following a 1.4% decline. On Monday, gold’s sister metal hit its highest settlement since Feb. 1.
