Gold could face losses as bond yields continue surging

As bond yields surge, investors Advised To Build Strategic Position in the gold market
Economists do expect to see lower gold prices in the near term as markets begin to price in further aggressive monetary policy action from the Fed. Higher inflation prompted markets to price in a 21% chance that the Fed will raise interest rates by 50 basis points in March.

These expectations pushed the yield on US two-year notes above 4.6%, its highest level since 2007. At the same time, the yield on one-year notes is above 5%. So far, when looking at inflation expectations, real bond yields are currently seeing positive returns.

This is a tough environment for gold and markets are expected to see further downside risks in the next two weeks. April gold futures ended last week in neutral territory at around $1,850 an ounce. Markets are closed Monday for the Presidents’ Day long weekend.

The gold market continues to show relative strength despite the selling pressure. The precious metal’s price action as well as resilient strength in gold could obviously be seen as the market calling out central bankers’ hawkish language. At the time of writing, gold is standing at the $184090 threshold.

The rise in shorter-term bond yields has pushed the inverted yield curve to its widest level in 40 years. This market trend indicates that it is only a matter of time before the United States falls into a recession and the Fed would be forced to unwind its aggressive tightening. As soon as unemployment starts to rise, the Fed will quickly loosen interest rates.