Is the Sudden Rallying of Gold Price Sustainable?

Written by: Faith Maina
April 13, 2021
  • Gold price has risen sharply as a reaction to the falling US treasury yields.
  • The 10-year US bond yields have dropped to 1.65, with the US dollar declining to 91.94.
  • Better-than-expected US inflation data are a sign of the economy’s steady recovery.

The sharp surge in gold price is a reaction to the fall in US bond yields and the US dollar. However, the better-than-expected US core CPI numbers are an indication that the US economy is still on a steady path to recovery. Investors looking to buy gold are keen on whether the rallying is sustainable.

gold price

Bond Yields Dynamics

Gold price is rallying following the decline in US treasury yields and the greenback. The metal is trading at 1739.15; recouping this week’s losses. The surge is a reaction to the drastic fall in the benchmark 10-year US bond yields. The yields are at 1.65 after rising to 1.70 earlier on in today’s session. The yields have been on recovery for close to a week after hitting a low of 1.61. The 2, 5, and 30-year bond yields are also down by 3.57%, 2.72%, and 0.53% respectively.

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Typically, US treasury yields offer support to the US dollar. With the low bond yields, the greenback is down to 91.94. It is currently at its lowest level since 23rd March. Notably, it has fallen by about 0.39% from today’s high, which is bullish for gold price.

Furthermore, the fall in bond yields is a sign that investors have eased their inflation concerns. The US inflation data has further pointed to the steady recovery of the US economy. The core CPI has beat the estimates of 0.5% MoM by coming in at 0.6%. This is also higher than February’s 0.4%.

Gold Price Technical Outlook

Gold price is soaring as the US bond yields and the US dollar drop. After declining to around 1724.08 earlier in the day, the precious metal has surged to the current 1739.15. Besides, it is above the 20 and 50-day exponential moving averages.

Gold price has been on a downtrend for close to a week. However, the bulls seem to be gaining control of the market. If they manage to push the price past the prior resistance level at around 1745.32, the next target will be 1760.

On the flip side, it may pull back and find support at the levels of 1730.15 and 1723.67. Below those points, the target will be at the psychological level of 1700.

gold price