Gold slipped further today, testing two week low as gains in US dollar and Bitcoin hurt the metal. The US dollar index soared in line with the rising treasury yields and broke above the key 90 levels. Bitocoin futures also jumped nearly 5% to approach $ 9000 levels and capped Gold after the metal pulled back from a three month high few days back. COMEX Gold is currently trading at $ 1327 per ounce, down 0.80% on the day. MCX Gold futures are trading at Rs 31235 per 10 grams, down 0.63% on the day as a drop from highs above Rs 31500 continued.
The World Gold Council (WGC) noted in a latest update that investors often use the direction of the US dollar as a bellwether for gold’s performance. However, over recent years, short-term movements in gold have been more heavily influenced by US interest rates and expectations of policy normalisation. Our analysis shows that the correlation between gold and US rates is waning and that the US dollar is again a stronger indicator of the direction of price. And, in our view, this will continue over coming months – even while the dollar won’t explain gold’s movements entirely. Furthermore, the analysis shows that higher real rates have not always resulted in negative gold returns.