Sustained strong labour and inflation numbers are boosting expectations that the US Federal Reserve will continue monetary tightening longer than anticipated. This is benefitting the US Dollar and weighing on the Gold price, strategists at ANZ Bank report.

Weakening inverse correlation of Gold with US yield

“Gold price is inversely tracking the USD. Strong labour and retail sales data are raising the spectre of sticky inflation, which means the Fed will likely keep rates higher than expected. This is a downside risk for the Gold price. Furthermore, the relationship between real rates and Gold is weakening.”

“Investors’ net-long positions have increased, but physical allocation (via ETF holdings) is still missing. Higher Gold prices are also impacting physical demand in India. Chinese wholesale demand for gold is weak too. Central banks’ purchases have been resilient.”