Gold weakens as bond markets suffer from Trump effect
Gold trades in the $2,370s on Monday, after pulling back from Friday’s peak of $2,393 reached following the release of US NonFarm Payrolls (NFP) data.
Although the overall weaker US labor market data in the NFP report increased bets the Federal Reserve (Fed) will begin cutting interest rates earlier than previously expected, which is positive for Gold, price has started to come down due to a “Trump-put” on the bond markets.
Given the question marks over President Joe Biden’s capacity to hold office and with no popular replacement on the radar, Trump is increasingly being viewed as the most likely candidate to win the presidential election. Known for cutting taxes and borrowing to cover the short-fall, his fiscal policies are likely to keep inflation high, leading to higher interest rates. This is having a negative impact on US Treasury bonds and pushing up yields, which are inversely correlated to Gold. The US Dollar is also benefiting from the outlook and further weighing on Gold price, which is primarily bought and sold in USD, according to Reuters
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