Gold tumbled on Friday as risk-taking mood gained momentum thanks to higher bond yields, stronger USD and prospects of global expansion. However, gold weekly returns were the strongest since late August.
Falling US long-dated bond yields helped gold to score decent gains, however later in the week, bond yields started to recover limiting gold’s ability to rise as opportunity costs increased.
While most FOMC members agree that the central bank may need to start tapering bond purchases as early as in mid-November, their views on inflation diverge. For example, Fed members Bullard and Bostic called for fast action as they worry about prospects of temporarily high inflation mutating into structural one. This may increase demand for inflation protection what the gold is best suited for.