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James Hyerczyk
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Comex Gold

Gold futures are inching lower late Tuesday in a volatile trading session that saw prices break sharply lower shortly after the regular session opening only to erase those losses later in the afternoon.

Gold prices traded weaker early in the day as rising U.S. Treasury yields offset support being generated by a weaker U.S. Dollar and as investors took profits from last week’s rally ahead of U.S. consumer price data on Wednesday.

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At 19:19 GMT, June Comex gold futures are trading $1837.20, down $0.40 or 0.02%.

10-Year Treasury Yield Rises Amid Inflation Fears

U.S. Treasury yields rose on Tuesday as investors continue to pore over any signs of rising inflation.

The yield on the benchmark 10-year Treasury note rose 2 basis points to 1.62%. The yield on the 30-year Treasury bond added 3 basis points to 2.35%. Rates on notes with shorter maturities were anchored in place.

Inflation remained front and center on Wall Street as fears the Federal Reserve may be forced to raise interest rates sooner than telegraphed may be putting a lid on gold prices.

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US Dollar Near 2-1/2-Month Lows as Commodity Gains Stoke Inflation Worries

Resource-oriented currencies including the Canadian Dollar and the Aussie consolidated gains on Tuesday, as a rally in commodity prices boosted their appeal, while the greenback held near multi-month lows on growing concerns about price pressures.

Soaring commodity prices have sent the cost of raw materials from copper to iron ore and lumber to record highs, raising concerns that inflation may not be as transitory as some believe with U.S. breakeven interest rates scaling multi-year peaks.

Short-Term Outlook

“The big question is whether the Fed can be comfortable staying dovish,” said Bank of Singapore currency analyst Moh Siong Sim. “If inflation rises more than the Fed expects…what happens to the Fed then?”

Markets expect U.S. year-on-year inflation to hit 3.6% in April, juiced by the base effect of a pandemic year contraction.

The bulls will remain in control of the gold market as long as the June Comex gold futures contract can hold above the long-term 50% level at $1788.50.

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