Sumary of Gold Price Analysis: XAU/USD Gains May Not Last on Possible CPI Overreaction:
- A pullback in Treasury yields provided cover for bullion to advance higher.
- Markets appear to have taken the easing in inflation pressures as a signal that the Federal Reserve may push back balance sheet tapering in the coming months and extend its super-easy monetary policy – both of which promote government bond-buying.
- Chart created with TradingView The 10-year Treasury Inflation-Indexed Security (TIPS) yield shifted lower overnight following the CPI print.
- Like with nominal Treasury yields, it is due to the opportunity cost falling for bullion holders when real yields drop;
- Markets may have overreacted on bets whether the Fed will push off tapering.
- Once the Fed does start tapering its asset purchases, the reduced demand on bonds is all but sure to exert an upward force on yields.