Gold price has pulled back as a reaction to Janet Yellen’s comments on inflation and the government’s proposed stimulus package. While her remarks would not impact the Fed’s decision, they are weighty in the markets. In an interview with Bloomberg News on Sunday, the US Treasury Secretary and former Fed Chair noted that proposed $4 billion government spending would have a positive impact on the nation. While acknowledging that it may prompt the Federal Reserve to hike interest rates, she insisted that it would not cause an inflation over-run. She stated,
“If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view.”
Yellen’s comments have revived reflation concerns, as reflected in the rebounding of Treasury yields. At the time of writing, the benchmark 10-year US bond yields were up by 1.75% at 1.58. The yields had dropped from an intraday high of 1.61. At the same time, the 5 and 30-year yields are up by 1.19% and 0.51% respectively. Treasury yields usually offer support to the US dollar, which is a bearish catalyst for gold price.
In the ensuing sessions, gold price will also be reacting to the JOLTs job openings scheduled for Tuesday and the US inflation data on Thursday. In both events, higher-than-expected figures will push the greenback higher while exerting pressure on gold price.
Gold price technical outlook
Gold price is down by 0.4% at $1,883.65. On Friday, the precious metal surged from an intraday low of 1,856.10 to 1,896.57. On a two-hour chart, it is trading slightly below the 25 and 50-day exponential moving averages.
I expect gold price to continue finding support at around 1,880. On the upside, it may surge to 1889, where it will probably ease before rising further to Friday’s high at 1,896.57.