Gold Price Remains Above $1280 as the USD Reaches Target High

New York (June 1)   In this column a few weeks ago, I mentioned gold may continue to be under pressure until we see the rising U.S. dollar reach a technical target of 95 on the cash-settled index and I had assumed at the time, gold would be below $1280 when it was reached. However, I was pleasantly surprised to see the safe haven metal trading back above $1300 when it hit 94.97 earlier this week. The 10-year Treasury Note plunging well below the 3% threshold since last Friday has also been supportive of gold and the yellow metal was able to manage a monthly close just above this critical level yesterday.

Furthermore, both gold and the U.S. dollar rose in unison on Tuesday, receiving safe haven inflows from euro zone investors while the yield on Italy's two-year government bond jumped from 0.8% to 2.7%. It was the biggest one-day jump for Italian two-year bonds since 1989. The political crisis in Italy spooked the global marketplace this week when the Italian Democratic Party (PD) called for parliament to be dissolved “immediately” in order to hold elections in Italy as soon as July. Sources from several of Italy’s main parties said they were in favor of fresh elections on July 29, following an inconclusive vote on March 4. The Italian economy is the third largest in the euro and has been anemic, while the country is also heavily in debt.

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