The prospect of the Fed’s reduced bond-buying pushed down U.S. bond prices, lifting their yields and hitting safe-haven assets that had benefited from low returns from U.S. paper
Gold rose on Tuesday morning in Asia but stayed near multi-month lows, amid a strengthening dollar and increasing bets that the U.S. Federal Reserve will begin asset tapering sooner than expected.
Gold futures gained 0.68% to $1,738.25 by 4:05 AM GMT, after reaching their lowest since Mar. 31 on Monday. The dollar, which usually moves inversely to gold, edged up on Monday and stayed near a more-than-two-week high.
The prospect of the Fed’s reduced bond-buying pushed down U.S. bond prices, lifting their yields and hitting other safe-haven assets that had benefited from low returns from U.S. paper, such as the Swiss franc and gold.
U.S. Treasury yields rose to a more than three-week high as strong jobs data from the U.S. pointed towards an improving market. The latest U.S. jobs report, released during the previous week, said non-farm payrolls rose by 943,000 while the unemployment rate declined to 5.4% in July.
The market is repricing the Fed’s tapering. It has only begun and I expect market adjustment to continue. The market will likely test the euro’s low so far this year, said Jun Arachi, senior strategist at Rakuten Securities.
Fed officials also hinted that the central bank could begin returning to pre-pandemic settings earlier than expected.
Atlanta Fed Bank President Raphael Bostic said on Monday that asset tapering could begin as soon as the fourth quarter, but that it could begin even earlier if the jobs market maintains its recent pace of improvement.
Bostic’s colleague, Boston Fed Bank President Eric Rosengren, said the Fed should announce in September that it will begin reducing its $120 billion in monthly purchases of Treasury and mortgage bonds in the fall.
In other precious metals, silver was steady at $23.43 per ounce after dropping to an eight-month low during the previous session. Platinum and palladium edged up 0.1% to $980.81 and $2,603.20 respectively.