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  • Gold is being pulled in two directions, but bid on the day through key resistance.
  • Fed’s change in tone has catalyzed a steepening in the yield curve.

The price of gold is trading at $1,869.13 at the time of writing, travelling between a low of $1,832.57 and $1,870.48 on the day so far.

Markets flipped risk on this Wednesday in anticipation of Joe Biden’s swearing-in as the 46th president of the US.

The S&P 500 popped in the open and continued to edge higher around the event as Wall Street hit new record highs.  

Wall Street is liking Biden’s laid out $1.9trillion stimulus package proposal which is expected to boost the economy and speed up the distribution of vaccines. 

Meanwhile, US Treasury Secretary nominee Janet Yellen yesterday urged lawmakers to “act big” to save the economy and worry about the debt later.

However, ”gold is being pulled in two directions as its safe-haven features clash with its inflation-hedging properties,” analysts at TD Securities noted.

”Over the past months, gold’s trading regime featured rising inflation expectations, rather than nominal rates, as the primary driver of real rates.”

”Yet, over the past weeks, Treasury supply angst and the Fed’s change in tone have catalyzed a steepening in the yield curve, fueling rates vol which in turn has transformed gold back into a safe-haven product as real rates are increasingly driven by nominals, rather than by inflation expectations.”

”For the time being, the rise in rates has remained contained, allowing real rates to tumble once again and resulting in a tug-of-war between gold’s clashing investment properties,” the analysts added.

”In this context, gold would need rates vol to remain contained in order for its inflation-combating features to shine once again.