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James Hyerczyk
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Comex Gold

Gold futures are down, but recovering from a nearly 2.0% drop earlier in the session. Firm Treasury yields and a stronger U.S. Dollar were pressuring prices, weighed down by fears that the U.S. Federal Reserve may provide a path for tapering its expansive monetary policy at its two-day meeting this week.

At 16:06 GMT, August Comex gold is trading $1866.10, down $13.50 or -0.72%.

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The chatter in the market centers on liquidation for a second session. On Friday, traders blamed the surge in the U.S. Dollar on it. Today, they are saying it may be responsible for the early plunge in gold. Liquidation only fuels the theory that investors are unsure about what the Federal Reserve is going to say on Wednesday.

Gold traders have a lot to worry about too. It’s not just the Fed’s monetary policy statement but market participants will also closely scrutinize the Federal Reserve’s evolving outlook on unemployment, inflation and economic growth, as well as the likely date of a first rate hike. We could see a further decline in prices if the Fed steers the conversation toward tapering.

In other news, speculators reduced their net long positions in COMEX gold in the week-ended June 8.

Treasury Yields Rise Slightly as Investors Gear Up for Fed Meeting

Treasury yields rose slightly on Monday, with investors gearing up for the Federal Reserve’s two-day policy meeting this week.

The yield on the benchmark 10-year Treasury note rose less than a basis point to 1.49%, up from the 3-month low at 1.43% hit on Friday. The yield on the 30-year Treasury bond climbed to 2.18%.

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Dollar Index Turns Lower after Giving Up Earlier Gains

The dollar index is trading lower at the mid-session after giving up an earlier gain. This follows the biggest weekly rise in six weeks as traders cut their bearish bets before a much-anticipated U.S. Federal Reserve meeting that might signal a change in the outlook for U.S. monetary policy.

While the consensus expectations are the Fed will remain on hold until 2023, some believe the failure of the dollar to weaken in recent days despite inflation-adjusted U.S. bond yields softening further signals a broader caution among investors.

The dollar has gained in recent weeks even as yields on benchmark 10-year U.S. Treasury notes fell to more than three-month lows of 1.42% on Friday.

Short-Term Outlook

We’re looking for the choppy trade to continue until traders get some guidance from the Fed on Wednesday.

The Federal Open Market Committee is due to meet on Tuesday and Wednesday to discuss policy. Fed Chairman Jerome Powell is then set to hold a press conference following the meeting at 18:00 GMT on Wednesday.

For a look at all of today’s economic events, check out our economic calendar.
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