08 January 2021 : 10-year Treasury yields breached the psychologically important one percent mark this week, and along with the Dollar rebound have dealt a slight setback to Gold prices. Yet, the precious metal is still trading above the key $1900 level and it remains on course for a sixth straight weekly gain.

Bullion remains supported by the reflation trade, amid expectations that Democrats’ control of the White House, Senate and the House of Representatives should pave the way for more incoming fiscal stimulus that can drive up US inflationary pressures.

However, should December’s non-farm payrolls report later today offer more evidence of a stalling US jobs market, that may dampen Gold prices in the immediate aftermath, while waiting for more inflationary boosters to come through. The Fed’s conveyed tolerance for an inflation overshoot also bodes well for the precious metal’s upside.

Spot Gold still harbours the potential to reclaim the $2000 handle, especially if the precious metal’s tailwinds can gather pace as 2021 unfolds.

However, as commented by Fed officials this week, there appears to be a risk of a pullback in the Fed’s asset purchasing programme should a US economic outperformance crystalize in the latter part of the year. Another massive yields spike may then trigger the further unwinding of Gold’s recent gains.

Source: Han Tan, Market Analyst at FXTM

Reporting for EasyKobo on Friday, 08 January 2021 in Lagos, Nigeria