China and the tightening effect

Gold fell on signs that the latest wave of the pandemic is easing in China and expectations of a rapid rate hike amid record inflation in the Eurozone. Gold continued to fall in Asian markets after falling 1 percent in the previous session, as signs that the pandemic in China is easing and rising bond yields dampened investor interest in the precious metal. Shanghai reported the lowest number of cases in three months, while restrictions were eased in some regions. The optimism that China has brought the latest outbreak under control has raised the country's growth expectations and caused interest in gold to decline. The rise in U.S. bond yields this week also contributed to the non-interest-bearing precious metal losing more of its appeal. Spot gold tested below $1,830, reaching its lowest level since May 19. Spot gold closed its second month of monthly declines on Tuesday. The decline was largely due to expectations that the Fed, which is trying to curb the highest inflation in 40 years, will raise interest rates rapidly. Market attention will be focused on Friday’s U.S. nonfarm payrolls data, which could provide more clues about the pace of tightening. The record-breaking inflation for the Eurozone announced Tuesday has also prompted discussions at the European Central Bank about how quickly interest rates will be raised. “While investors’ concerns about inflation and economic growth have been focused on rising bond yields around the world, gold prices have declined,” said Edward Moya, senior market analyst at Oanda Corp. “There is strong resistance for gold at $1,870, and if the sell-off in the bond market reverses, the precious metal could struggle in the short term.”