Is it Gold’s Lucky Day After BoJ’s Surprise Decision?

Gold is trading at $ 1818.31 per ounce at the time of writing versus the previous closing price at only $1787.30 on Monday. Gold price is making tracks to the upside despite the Bank of Japan’s surprise relaxation on the yield of its 10-year bonds (JGBs).

US Dollar is sinking while the Japanese Yen is rallying speedily. US Treasury yields and a hawkish Federal Reserve could be the spanner in the works for the gold price bulls.

The Gold price is higher on Tuesday due to volatility in the market that has sent the US dollar lower on the back of a surge in the Japanese Yen following a surprise move by the Bank of Japan (BoJ) in Asian markets.

BoJ’s decision to raise a cap on the yield of its 10-year Japanese government bonds sent markets into a state of shock and tempted investors away from US debt. The BoJ is allowing 10-year bonds to trade at interest rates up to 0.5%, up from 0.25% and such a rise in the cap encourages domestic buying of its bonds.

Gold price has rallied despite the subsequent lower global borrowing costs and sell-off in bonds across the world, likely as a direct effect of a cheaper US dollar.

The dollar fell early on Tuesday, recovering ground unevenly throughout the rest of the day to end the day mixed after BoJ’s decision triggered the dollar’s selloff as the Japanese central bank announced its monetary policy decision.

The BoJ left its benchmark rate unchanged at -0.1% and maintained the 10-year Japanese Government Bond (JGB) yield at 0.00%, as expected. Policymakers, however, introduced a minor twist: they will allow the 10-year JGB yield to fluctuate between -0.5% and 0.5%, compared to -0.25% and 0.25% previously, and noted that they would review the yield curve control operation.