Price of Gold Fundamental Daily Forecast – Suffering from Low Demand as Treasury Yields Strengthen

Gold futures are inching lower on Monday despite a lower U.S. Dollar, but that only means that smart investors are paying more attention to rising Treasury yields than the falling greenback. If you don’t start watching the higher correlated yield/gold relationship then you are going to be left in the dust by watching the less-accurate dollar/gold correlation.

At 11:52 GMT, April Comex gold is trading $1820.50, down $2.70 or -0.15%. Gold futures are essentially closed in the U.S. on Monday due to the Presidents’ Day holiday, but there is some light e-trading taking place.

US Treasury Yields Jump to 11 Month High

Gold prices are likely being capped amid a jump in U.S. Treasury yields to their highest in nearly 11 months in the previous session.

Benchmark U.S. Treasury yields rose to their highest levels since March on Friday, while inflation expectations edged up to a six-year high. Higher inflation boosts gold but also lifts Treasury yields, which in turn increases the opportunity cost of holding bullion.

US Consumer Sentiment Ebbs in February Despite Additional Stimulus Hopes

U.S. consumer sentiment unexpectedly fell in early February amid growing pessimism about the economy among households with annual incomes below $75,000, even as the government is poised to deliver another round of COVID-19 relief money.

The University of Michigan said on Friday its consumer sentiment index slipped to 76.2 in the first half of this month from a final reading of 79 in January. Economists polled by Reuters had forecast the index little changed at 80.8.

“More surprising was the finding that consumers, despite the expected passage of a massive stimulus bill, viewed prospects for the national economy less favorably in early February than last month,” the University of Michigan said in a statement.

The survey’s measure of current economic conditions dipped to a reading of 86.2 this month from 86.7 in January. Its gauge of consumer expectations dropped to 69.8 from 74.0 in January, attributed entirely to households with incomes below $75,000.

“Households with incomes in the bottom third reported significant setbacks in their current finances, with fewer of these households mentioning recent income gains than anytime since 2014,” the University of Michigan said.

“Among those with incomes in the bottom third, just 23% reported improved finances, the lowest since 2014. In contrast, among those with incomes in the top third, 54% reported their finances had improved.”

Higher Inflation Expectations

Consumers also appeared to anticipate higher inflation in the near-term. The survey’s one-year inflation expectations rose to 3.3% from 3.0%. But its five-year inflation outlook was unchanged at 2.7%.

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