FXStreet notes that gold has had a cumulative gain of about 30% so far this year ignited by the pandemic but economists at HSBC believe the recent rally may be overdone. Yet, a further dip in US bond yields can sustain a modest rally in yellow metal.

“The ‘nuts and bolts’ of Mr. Powell’s speech were largely expected. However, he did not touch on what could have been much more gold bullish topics of monetary policy, such as asset purchases and yield curve control. We believe that the rally in gold last Friday (28 August) has been overdone and should bond yields stay firm, or USD selling abate, gold could weaken.”

“We believe a further dip in US bond yields can sustain a modest rally in gold. For many months, gold was more impacted by US bond yields, especially the yield on the US 10-year Treasury note, than any other single factor, although historically gold is usually more influenced by the USD, with which it is inversely correlated, in our precious metals analyst’s view.”