Gold bulls make handbrake turn after reaching milestone high

Gold edges lower after topping at a new record high of $2,790 on Thursday. 

The yellow metal sees downside pressure from rising US Treasury bond yields following stronger US employment data. 

Hopes of a Middle East ceasefire and the probability of a Trump victory are also weighing on Gold.   

Gold (XAU/USD) pulls up and reverses from its new record high of $2,790 on Thursday. The precious metal is pulling back partly due to rising US Treasury bond yields, which reflect elevated interest rate expectations. These, in turn, reduce the attractiveness of  non-interest-paying assets such as Gold. 

Strong US ADP employment data on Wednesday helped provide an antidote to the weak US JOLTS Job Openings data released earlier in the week because it suggested the US labor market was not in as bad shape as feared. This is reducing bets the Federal Reserve (Fed) will need to slash interest rates to boost employment. The market-based probabilities, using the price of interest-rate swaps as a guide, forecasts an almost 100% chance of a 25 basis point (bps) or 0.25% cut by the Fed in November but a 70% probability in December.  

Bond yields might be further rising because of the increasing odds of the Republican nominee Donald Trump winning the race to the White House. Trump’s preference for lower taxes, higher government borrowing and tariffs on foreign imports would probably be inflationary for the economy and lead the Fed to keep interest rates higher for longer.