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Gold Prices Drop as Bond Yields Increase

April 27, 2017
By Daisy Joseph

US dollar is not a favorable

The strengthening of US dollar is not a favorable position for the prices of the yellow metal. The risk appetite reduces in a market with a stronger dollar. The yields of treasury bonds soared, which motivates the investors to invest in those instead of the haven commodities. The Fed also reflects the mood of the investors as there is hope for a rate hike soon. The non-interest-bearing assets are directly affected due to this change in the forex market.

Along with the US dollar, Euro also strengthened in the market, showing the optimistic views of the investors. The first round of French Presidential election favored Macron instead of Le Pen which helped Euro to gain the forex market. With the risk of French elections reduced, the market is now focused on Trump polices regarding the tax reforms.

The baseline corporate tax is expected to be reduced to 15% from 35%. This could result in budget deficit which doesn’t bother the White House. However the House of Representatives is not keen on increasing the budget deficit. The FED rate hike bets continue to increase as investors are rooting for economic growth.

Market experts are waiting for the release of the tax proposal to analyze its pass-ability. If the hopes of the investors are dampened, it may push the dollar down in the market. This could result in the increase in oil prices. However, experts feel that it is highly unlikely given the current market conditions.