Falling U.S. yields to protect downside for gold price - ANZ

FXStreet notes that gold is under pressure amid fears of tighter monetary policy and renewed strength in the USD. Nevertheless, record low US 10-year real interest should limit any significant sell-off from the current level, in the view of strategists at ANZ Bank. 

“Record low US 10-year real yields are supporting gold as the Fed debates tapering asset purchases. However, elevated inflation expectations appear to be having limited impact.”

“Lofty equity valuations are increasing the risk of a market correction. This could encourage investors to hold safe-haven assets. Renewed strength in the USD is a key headwind. Hawkish Fed comments could support the USD and drag prices lower.”

“Despite low-inerest rates and accommodative central banks’ stance, investment demand is not picking up. ETF flows in gold and silver remain subdued, while investors sold their long futures positions. Retail investment is showing some encouraging signs, with US eagle gold coin sales rebounding strongly by 19% YTD.”

“Physical demand is recovering in China as well as India, with spot premium turning positive for both countries.”