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  • Gold trades at two-week highs above $1740, looks to recapture $1750.
  • Slump in Treasury yields knock-off US dollar index to ten-day lows.
  • Risk sentiment and yields – key drivers ahead of the FOMC minutes.

Gold  (XAU/USD) is consolidating Tuesday’s 1% rally in opening trades this Wednesday, sitting at the highest levels in two weeks above $1740.

Gold remains poised to extend the recent rally, with eyes set on the $1750 key barrier, as the US dollar nurses losses across the board while holding near ten-day lows amid a rout in the Treasury yields across the curve.

The US rates on the Treasuries fell for the third straight day on Tuesday, with the benchmark 10-year yields back under the 1.70% level. Investors turned cautious over the recent optimism on the economic recovery amid surging covid cases globally and fresh lockdown in key economies.

Also, with major central banks downplaying concerns over rising inflation, markets think that the sell-off in the Treasuries could be overdone, in turn prompting the declines in the yields and the US dollar.

Falling Treasury yields tend to benefit the non-yielding gold. However, the gains in gold appear limited, courtesy of the record rally in Wall Street indices. Also, FOMC minutes remain in focus for fresh hints from the Fed on the economic and inflation outlook, which could have a significant bearing on the yellow metal.

Meanwhile, gold traders could take cues from the broader market sentiment and US dollar price action, which hinges on the dynamics in the yields.

Gold: Additional levels