. Gold Rises on Falling Yields, Debt Deal Vote - 01 June 2023

Gold Rises on Falling Yields, Debt Deal Vote

Gold Rises on Falling Yields, Debt Deal Vote

01 Jun 2023

Gold Gains as US Treasury Yields Dip and Debt Deal Vote Looms.


Gold prices experienced a modest increase, rising by 0.33% to settle at 60198, as the yield on the US 10-year Treasury note declined below 3.7%. Investor focus shifted towards the impending vote on the debt deal after U.S. President Joe Biden and Speaker Kevin McCarthy reached an agreement. In other news, Germany’s consumer price inflation decreased in May, while the number of job vacancies in the United States unexpectedly rose, indicating a tight labor market. Additionally, the central bank of Iraq announced an increase in its gold reserves, signaling a growing shift towards the precious metal. This article provides an analysis of the factors influencing gold prices, including Treasury yields, economic indicators, and technical aspects of the market.

US Treasury Yields and Debt Deal Vote: Decline in US 10-year Treasury Yields Gold prices received a boost as the yield on the US 10-year Treasury note dropped below 3.7%, significantly lower than the previous week’s peak of 3.85%. The decline in yields increased the appeal of non-interest-bearing assets like gold, leading to a modest uptick in prices.

 Impending Debt Deal Vote Investor’s attention focused on the debt deal struck between President Joe Biden and Speaker Kevin McCarthy, which was scheduled for a vote in the House of Representatives. The agreement aimed to raise the debt ceiling for two years and maintain non-defense spending at relatively stable levels in fiscal 2024, with a slight increase projected for the following fiscal year. The outcome of the vote held implications for market stability and further fiscal decision-making.

Germany’s Consumer Price Inflation and US Job Vacancies:

 The Decline in German Consumer Price Inflation Germany’s preliminary estimate showed a decline in consumer price inflation to 6.1% year-on-year in May 2023, compared to 7.2% in the previous month. This figure fell below market expectations of 6.5%. The decrease in inflation may reflect a cooling of price pressures and potentially impact investor sentiment towards safe-haven assets like gold.

 Unexpected Rise in US Job Vacancies The United States reported an unexpected increase in job vacancies, rising by 358,000 to reach 10.10 million in April 2023. This figure surpassed market expectations of 9.375 million and indicated a rebound from the previous month’s near two-year low. The tight labor market suggested potential grounds for the Federal Reserve to consider additional interest rate hikes. Such a scenario could impact the attractiveness of gold as an alternative investment.

Central Bank of Iraq’s Gold Reserves Increase:

 The central bank of Iraq revealed a significant shift towards gold as it increased its gold reserves by 2% in a single day. This move indicates a growing preference for the precious metal as a store of value and could influence market sentiment regarding gold’s long-term prospects.

Technical Outlook and Market Analysis:

 Fresh Buying and Open Interest Gain Technically, the gold market witnessed a rise in open interest by 3.37%, settling at 15442. This increase in open interest suggested fresh buying interest among market participants. Prices also surged by 200 rupees, further supporting the positive sentiment.

Technical Summary

 Support and Resistance Levels for Gold Prices Gold is currently finding support at 59921, with a potential downside target of 59643. On the upside, resistance is expected at 60431, and a breakout above this level could lead to prices testing 60663. These levels provide reference points for traders and investors evaluating potential price movements in the gold market.