Gold prices are currently falling, despite falling US Treasury yields and a relatively stable dollar. 10-year US Treasury bonds are currently yielding 2.84%, down from 2.95% last week. As gold trades inversely to real interest rates, the precious metal tends to strengthen when nominal rates fall. Today's sell-off in gold is therefore fairly surprising. Looking at the US dollar, the buck is currently taking a breather after rising for two sessions in a row. As we wrote earlier, the US dollar has been supported by Federal Reserve Chair Powell's testimony to Congress. Turning to inflation data, Q4 core personal expenditures (the Fed's preferred measure of inflation) was mostly within expectations. Later today, we'll see Core PCE figures for January. We expect inflation to slow moving forward, thanks to base effects and falling commodity prices. Assuming future inflation figures trend lower, gold should resume strengthening as rate hike expectations fall. Our short-term outlook on gold is neutral, while our medium-term outlook remains bullish.
After its most recent top around $1,353, gold is now above $1,311.