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Gold unwinds year-to-date gains

Last week, we cited the risk of gold unwinding its year-to-date gains.

Today, the precious metal can no longer lay claim to any year-to-date gains, which stood at nearly 6% at the onset of February.

Gold’s wings have been clipped by the resurgent US dollar on bets that the Fed isn’t quite done with its rate hikes just yet.

The forecasts for peak US rates have already been revised higher by 40 basis points so far this month, now up to 5.3%.

After witnessing stubbornly-elevated consumer and producer prices following January’s blockbuster US jobs report, while heeding the hawkish chorus emanating out of this week’s Fed speak, markets are clearly repricing their expectations for peak US interest rates, much to the chagrin of zero-yielding previous metal.

Despite the “golden cross” formed last month, spot gold has tumbled by over $100 so far this month.

At the time of writing, bullion is falling towards the psychologically-important $1800 mark.

Gold unwinds year-to-date gains

As the forecasted US rates peak moves higher, the greater the potential near-term downside for spot gold.

Ultimately, gold is likely to find a sturdier floor only once markets can get accustomed to the eventual peak for US interest rates, and get reacquainted with the “Fed pivot” narrative.



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