Gold Price Analysis: XAU/USD to lose some of its lustre as real yields rebound – CE

Gold’s price tends to rise when the important yields folks government bonds fall and the other way aroundwithin the view of economists at Capital Economics, the important yields of long-dated Treasuries are set to rise, subsequently, XAU/USD should retreat during the rest of this year.

See – Gold Price Analysis: XAU/USD to check $1,900 amid data disappointments – TDS

Gold’s outlook depends heavily on what happens to the important yields of long-dated Treasuries
“While the recent rebound within the price of gold may owe something to greater demand for safe havens in response to faltering equity prices, also on cryptocurrencies coming struggling, most of it can probably be explained by a marked pull-back within the real yields of long-dated Treasuries after their surge earlier this year. We doubt the pull-back will last, though, and are sticking to our forecast that the worth of gold will end 2021 at $1,600/oz.”

“The retreat of real yields of long-dated Treasuries thus far within the second quarter of 2021 probably reflects a sense that excellent news on growth – after a successful vaccine rollout and large fiscal stimulus – is essentially discounted and could be hampered by supply shortages. We don’t expect it to continue, though, which leads us to expect that gold will lose a number of its luster.”

“Our view that the important yields of long-dated Treasuries will rebound is partly because we anticipate that the recovery within the US will remain quite healthy despite supply shortages that threaten to hamper output.”

“Measures of long-dated inflation compensation have already risen an extended way above 2%. this means to us that investors will anticipate more monetary tightening within the distant future if they keep edging up, especially if the Fed continues to worry that it sees current inflationary pressure as transitory and remains in no mood to tighten policy while the market is below ‘full’ employment.”

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