Gold Back on Track after Worst Month in Four Years

Gold is back on track after worst month in four years.

Gold rebounded after falling by more than 8% last week and reaching its lowest level since late 2016, a fall attributed to the dollar retreating and traders focusing on a COVID-19 recovery and the more attractive option of Treasury bond yields in contrast to the interest-free yellow metal.

Central Banks’ reassurances that policy support will remain unchanged managed to stabilize last week’s global bonds’ sell-off, calm markets to some extent and pull treasury yields back from their highest level in a year. Investors are concerned that a possible upcoming accelerating inflation could cause monetary policy support to be withdrawn despite assurances from the Federal Reserve that optimism for a pandemic recovery is the driving force behind higher yields.

Gold entered 2021 decreasing as the demand for higher, interest-bearing Treasure yields increased, and the world-wide roll-out of vaccinations sparked optimism about a pandemic recovery. Spot gold loss rose to 6.2% in February, the highest loss since November 2016 while in contrast silver, platinum and palladium went up.

The gold price is going up now due to expectations that Treasury yields have reached their highest point for now. President Joe Biden’s $1.9 trillion COVID-19 aid package was passed by the U.S. House of Representatives during the weekend with the bill on its way to the Senate.

According to analysts, if inflation rise reflected in lower bond prices emerges by mid-2021, central banks will be forced to withdraw their current support. The falling price of gold indicates that concerns over higher rates overshadow the safe haven quality of the precious metal.

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