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Gold set for back-to-back weekly drops on Fed hikes outlook

Higher nominal and real yields are having a nauseous effect on bullion bugs, with such a combo severely dampening the appeal of the non-interest paying precious metal. 10-year US Treasury yields have risen above the 3% mark for the first time since 2018, while real yields have punched their way this month into positive territory for the first time since the pandemic.

The unrelenting rise in US Treasury yields and the dollar has dragged gold below the psychologically-important $1900 level, with spot prices now languishing below its 100-day moving average and a key Fibonacci level.

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Gold was unable to capitalize on Fed Chair Powell’s less-hawkish than expected message this week, with bullion bulls aware that US rates are bound to rise anyway, just not likely by way of a 75 basis point hike.

Should Friday’s nonfarm payrolls point to a resilient US jobs market that paves the way for more Fed policy tightening, that could strengthen the cap to gold’s upside.

The prospects of the Fed hiking rates by 50 basis points at each of the “next couple of meetings” are set to undermine gold bulls over the summer.

 

 

 

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