Price of Gold Fundamental Daily Forecast – Strengthens as Buyers Ignore Potentially Bearish Fed News

Gold futures stabilized enough after a sharp break the previous session to close higher on Friday as U.S. Treasury yields dipped and the U.S. Dollar eased off its session highs.

U.S. 10-year yields eased after hovering near a more than one-year peak hit on Thursday. Meanwhile, the greenback retreated from its session peak after an early spike, which drove it to its highest level in more than a week.

On Friday, June Comex gold settled at $1743.90, up $24.10 or +1.40%.

10-Year Yield Hovers Near 14-Month High amid Fed Bank Capital Decision

The 10-year U.S. Treasury yield hovered around its 14-month high on Friday after the Federal Reserve declined to extend a rule expiring at the end of the month that relaxed the supplementary leverage ratio for banks during the pandemic.

The yield on the benchmark 10-year Treasury note rose to 1.732% at the close. The yield on the 30-year Treasury bond rose to 2.451%.

The rule allowing banks to hold less capital against Treasurys and other holdings was implemented to calm Treasury markets during the crisis and encourage banks to lend.

The decision could have some adverse effects, traders have warned, it in response banks sell some of their Treasury holdings. That could send yields even higher at a time when a rapid rise in rates is already unnerving investors.

The 10-year yield topped 1.7% on Thursday, a 14-month high, while the 30-year yield briefly jumped above 2.5%. The sharp rise in yields followed comments from the Federal Reserve and its Chairman Jerome Powell, indicating that the central bank would allow inflation to run hotter.

US Dollar Rises after Fed Lifts Bank Leverage Exemption

Gold was pressured early as the U.S. Dollar advanced against major currencies on Friday, hitting a more than one-week high, after the Federal Reserve allowed a pandemic-driven break on capital requirements lapse, pushing U.S. Treasury yields off their lowest levels of the day.

The Fed announced on Friday it would let expire on March 31 a temporary rule directing larger banks to hold more capital against their assets, such as Treasuries.

A weaker Euro also helped underpin the U.S. Dollar. The single-currency fell on concerns about further coronavirus lockdowns in Europe. France imposed a new four-week lockdown from Friday in 16 regions badly hit by the health crisis.

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