Gold witnessed recovery on softening of bond yields and weaker dollar, Inflation in Focus

Gold and silver prices fell on Friday. On Thursday, bullion prices rebounded in the international market as dollar weakened after US President Joe Biden signed a $1.9-trillion stimulus bill. However, gold could not sustain gains and bond prices fell and equity markets rose. Spot gold on Thursday closed at $1720 an ounce.

Worth mentioning here is that spot price of the gold had slumped to a nine-month low on Monday, but a pullback in Treasury yields helped spark a rebound that has put gold on track for a weekly gain of 1%. While the roll out of vaccines and prospects for faster economic growth are denting demand for the metal as a haven, helping send prices down more than 9% this year. Gold may continue to sway along with US dollar however a sharp rise is unlikely unless bond yields correct sharply or there are fresh positive triggers. 

We can also see that the silver market is starting to outperform the gold market yet again, due to the fact that industrial demand should pick up with all of the stimulus that is floating out there. However, if we do see interest rates fall in the United States, then that puts downward pressure on the US dollar which of course means that you will need more of those US dollars to buy silver. The other hand if yields start to rise again that could cause some issues. Silver is currently trying to settle above the $26 level while U.S. dollar is losing ground against a broad basket of currencies.

The inflation risks are growing at the same time, as handing out $1,400 to nearly every American and topping up and extending unemployment benefits are likely to fuel consumption. The U.S. has recently reported that Core Inflation Rate increased by 1.3% year-over-year on February compared to analyst consensus which called for growth of 1.4%. Weaker-than-expected inflation data put pressure on Treasury yields and the U.S. dollar, which is bullish for silver and gold prices.