The Gold (XAU/USD) Price rattled by Rising US Treasury Yields seems to have been triggered by several reasons. The first and foremost is the global slowdown. This means that investors from across the world are losing confidence in the United States Dollar, which makes the US Dollar more expensive than the XAU/USD.
Another is the increase in US Treasury yields, which mean that investors want to hold cash instead of risk taking the risk of buying assets. Thirdly, the increase in unemployment has made the job market tighter for many American workers who need a little extra income. This can also lead to a fall in sales in any country where this is happening. The global economy and the tightening job market are likely to make things worse for the US Dollar as a result.
All these factors combined with the increasing volatility of the US Dollar price, and the weakening value of the Euro, mean that the XAU/USD price is unlikely to recover its recent levels until it settles down to a more consistent level. In short, investors need to be very careful not to get caught in a cycle of over-bullish expectations on the US Dollar, followed by a correction that may be prolonged, as investors lose confidence and try to pull out of their positions.
One could say that this has happened before, as the global economic crisis in 2020 made many investors fearful of holding on to their gold. Now, even though the US Federal Reserve has begun a program of bond buying, there are still lots of people who prefer to keep their money in the safe confines of the precious metal.
This is because the US government has recently introduced new laws that are intended to prevent financial institutions from doing anything they see fit to affect the prices of precious metals. These laws will force financial institutions to follow the guidelines laid down by the Commodity Futures Trading Commission (CFTC) in regard to gold trading, which is a strict set of rules. The new rules are aimed at preventing the manipulation of prices and making the market more transparent and reliable.
In the meantime, investors can continue to speculate about what kind of effect the new laws might have on the gold market. Many are anticipating that there will be some restrictions on the amount of gold that traders are allowed to buy every day. However, it seems unlikely that this will have a dramatic effect on the global price.
Some think that this move is just another effort by the Federal Reserve to gain control of the gold market by controlling the price and limiting the number of transactions between traders and financial institutions. Although this is possible, it seems unlikely. Since there are many institutions trading this metal, the price will inevitably rise again once more. So, investors should probably focus on the fact that there is no sign of the market calming down in the near future.
However, for the time being, it appears that all that has changed and the gold market is back to normal. It is too early to say if the US dollar is going to recover from its recent fall, but we would certainly advise investors to ignore the current global economic crisis and concentrate on other aspects such as the political and economic stability in the US. Investors have to remember that gold is a solid investment and that it has many benefits, apart from the obvious fact that it can be kept at a lower price than the Euro and US Dollar.