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James Hyerczyk
Comex Gold

Gold futures are edging higher into the close on Monday after rebounding from earlier weakness. The “technical bounce” is likely being fueled by profit-taking and aggressive bottom-picking since the fundamentals seem a little stacked on the bearish side at this time.

Earlier in the session, gold prices eased, touching its lowest level since December 2, pressured by a firm U.S. Dollar and higher U.S. Treasury yields due to hopes of more fiscal stimulus.

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At 19:25 GMT, February Comex gold is trading $1848.30, up $12.90 or +0.70%.

Fresh Stimulus Talks Fueling This Break

The selling in gold started to escalate last week after President Trump said there would be peaceful transition in the office of president and after Congress ratified the electoral vote, essentially confirming that Joe Biden would be sworn in as President on January 20.

The selling began to accelerate after U.S. President-elect Biden said on Friday that Americans need more economic relief from the coronavirus pandemic now and that he will deliver a plan costing “trillions” of dollars on Thursday.

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10-year Treasury Yield Climbs Above 1.1% to Start the Week

The 10-year U.S. Treasury yield jumped above 1.1% on Monday, extending its recent advance on bets that more COVID-19 stimulus is coming.

The yield on the benchmark 10-year Treasury note rose 2 basis points to 1.132%, while the yield on the 30-year Treasury bond climbed 2 basis points to 1.892%.

Dollar Extends Rebound as US Yields Climb

The U.S. Dollar edged higher across the board on Monday, extending a rebound from the near 3-year low hit last week, taking strength from the recent spike in Treasury yields and the prospect of a growth boost from higher U.S. fiscal stimulus.

Ordinarily, the extra spending plans would force investors to worry about rising inflation and its detrimental effect on the U.S. Dollar in a weak economy, but the currency has been supported in recent weeks thanks to rising U.S. yields.

When the dollar goes up, foreign demand for dollar-denominated gold tends to go down.

Short-Term Outlook

The data is a little old, but speculators in the FX market remain extremely bearish on the dollar, U.S. Commodity Futures Trading Commission data released on Friday, showed.

Gold could get crushed if yields spike higher and dollar bears are encouraged to aggressively cover their positions.

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