Gold Prices Retreat Sharply amid Buoyant Treasury Yields

The US 10-Year Treasury yield has been growing since August 4, 2020, when Russia announced a locally developed Covid-19 vaccine. The news bailed the yield out of its bottom at 0.51%. As of writing time, it has reached as high as 1.12. The positive dynamic may boil down to the shift in investment. Traders in financial markets switch to stocks amid the rising risk appetite, which sends record highs to US stocks at the expense of bond prices. Since the yield is set to gain more in 2021, chances are it easily straddle the resistance at 1.25% and then challenge the higher 1.5%. With that said, the buoyant yield will play a role in both the metal market and the forex market.

In the forex market, the US dollar will reverse the decline amid the soaring yield. As financial markets have adopted an upbeat outlook on the US economy, expectations follow are that the Fed would raise interest rates early, which bodes well for the dollar. The aggressive yield, however, will hamper the haven-linked Japanese yen. The potential resistance for USD/JPY will lie at 104.76 or even 105.68.

In the precious metal market, prices of gold and silver plunged as shocked by the growing yield. Gold prices have been retreating from the fresh high of 2,075 since August 4, 2020, the same day the yield started to rebound. It suggests the bond market and the metal market reversed at the same in the wake of Russias claim. Gold and silver will suffer from double pressures in this case. By this account, the spot gold is likely to test $1,764, while the spot silver could test the $22 barrier.