Gold Price on Recovery Mode Amid Falling Treasury Yields

Written by: Faith Maina
April 8, 2021
  • Gold price remains on a steady path to recovery after moving past $1,750.
  • The metal has found support from the higher-than-expected US jobless claims.
  • The decline in US Treasury yields and US dollar remains the key drivers of the rally.

Gold price is on a steady path to recovery in the second quarter. For investors looking to trade gold, the US Treasury yields and value of the US dollar remains key drivers of the rally. A rise in US jobless claims has further offered support to the precious metal.

gold price

Same Dynamics, Different Outcomes

Gold price is on course to recovery after breaking out of the crucial resistance level of $1,750. The same dynamics that fuelled its downtrend in the first quarter have aided its recovery in the second quarter.

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The benchmark 10-year US Treasury yields had rallied to a 15-month high of 1.77. This pushed the US dollar to $93.44, which was its highest level since November 2020. With a strong US dollar creating an unfavourable environment for gold price, the value of the precious metal dropped to $1680; its lowest level since June 2020.

Notably, the easing of the US treasury yields and the greenback have facilitated the recovery of gold price. On Thursday, the metal was up by 1.04% at $1.755.86. This follows the decline of the benchmark 10-year bond yields to 1.63. Since the beginning of the week, it has dropped by about 6.82%. The 30 and 20-year yields have also fallen by 1.71% and 1.61% respectively.  

With the treasury yields offering support to the US dollar, the currency is down from $93.11 at the beginning of the week to its current $92. The greenback’s decline on Thursday was the market’s reaction to the higher-than-expected US jobless claims numbers. Analysts had expected a reading of 680,000, down from the prior week’s 728,000. However, the figure missed the estimates by coming in higher than both entities at 744,000.  

Gold Price Technical Outlook

On a 2-hour chart, gold price is trading above the 50 and 200-day exponential moving averages. The precious metal has been trading below the long-term EMA for the better part of the year’s first quarter. However, its move above the 200-day EMA has strengthened the bullish outlook.

Gold price is currently at $1,755.86 after struggling to hit the important resistance level of $1,750 since mid-March. It is likely to find resistance at $1,760 before the bulls attempt to push it higher to $1,814.20. On the flip side, a drop past $1,750 will have the bulls target the lower levels of $1,740 and $1,722.    

gold price