Gold Price Analysis: XAU/USD Gains May Not Last on Possible CPI Overreaction

gold price analysis xau usd gains may not last on possible cpi overreaction

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.

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