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Metals: Gold Falls as Dollar Rebounds, Treasury Yields Rise

31 January 2018

The dollar rose on Monday against a basket of currencies as USA bond yields climbed and traders waited for a Federal Reserve meeting and a report later in the week, while the euro and pound were both broadly down. The Fed began its meeting on Tuesday.

"Depending on the new Fed leadership, which is being run now by (Jerome) Powell, the market is concerned about whether we're going to see continued rate rises at the current velocity that's expected or whether it's going to be increased somewhat", he said.

Still, some investors have said higher interest rates might not send gold much lower if money managers use the metal to hedge against an unexpected pickup in inflation. Trump may have prevented another meltdown when he said he wanted a "stronger dollar".

On Tuesday night, U.S. President Donald Trump will hold a State of the Union address.

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"That certainly hasn't been a consistent correlation in the last several weeks, but I think that's what's happening today".

The U.S. dollar index, a gauge of the greenback against a basket of other major currencies, fell 0.18 percent to 89.19 as of 1806 GMT, but still higher than early morning. The index pulled up from a low of around 88.43 set last week, its weakest level since December 2014. The 10-year bond yield has been pushed above 2.7 percent.

Sterling, which is highly correlated to risk-on sentiment, briefly fell below the $1.40 line for the first time in a week before climbing back above the level and last trading at $1.414.

The shekel is strengthening against the dollar and against the euro.

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Investors were struck by Mnuchin's comments because for most of the past two decades, U.S. Treasury chiefs regularly stated that a "strong dollar is in the best interests of the United States".

In Washington, presidential press secretary Sarah Huckabee Sanders did not specifically answer whether the Trump administration prefers a strong dollar or a weak dollar when she was asked about Mnuchin's comments.

Bitcoin slipped on Tuesday to a new one-week low on Bitstamp Exchange, and was last down 10.19 percent at $10,025.64.

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Metals: Gold Falls as Dollar Rebounds, Treasury Yields Rise