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Gold rises amid falling yields on US debt securities

On Wednesday, in Asia, gold rose despite the continued strengthening of the dollar index. Demand for precious metals and other defensive assets is growing due to a decline in major global indices. Investor risk appetite has plummeted after US Treasury Secretary Janet Yellen said the economy was still in dire straits and would need tax hikes in the future to pay for infrastructure projects and other public investments.

The dynamics of the US Treasury yield curve also has a positive impact on gold. For the first time in 7 days, the yield on 10-year bonds dropped below 1.6%. The decline in profitability was facilitated by statements by FRS Chairman Jerome Powell. Speaking to Congress, he acknowledged that inflation is expected to rise this year, but noted that it will remain controlled. Exceeding the 2% target will be minor and short-term.

Powell's statements have weakened market expectations that the Fed may roll back its stimulus program earlier than noted earlier amid rising inflationary pressures. On the same day, Fed spokeswoman Lael Brainard noted that the regulator will show "determined patience" in anticipation of achieving its employment and inflation targets before ending support for the economy, which is still recovering from the pandemic.

Later today, the publication of interim data on PMI in Europe and the United States is expected. Also, the data on orders for durable goods in the USA may have a strong impact on the trading.

On the chart, the price continues to consolidate in a very narrow range of 1722.70 -1753.50. Today we are waiting for the development of a moderate upward movement to the upper border of this range.

  • Resistance levels: 1753.50, 1760.00, 1810.00.
  • Support levels: 1722.70, 1700.00, 1680.00.

The main scenario is growth to 1753.50.

An alternative scenario is a breakdown of the support at 1722.70 and a decline to 1700.00.

The current fundamental background is moderately positive. We are considering longs near the level of 1722.70.

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