18.10.202111:25 Forex Analysis & Reviews: Factors affecting gold's decline

The mood of the market about the upcoming changes in the Fed's monetary policy put pressure on gold.

Market participants expect that the Fed will begin to reduce monthly asset purchases by $ 120 billion next month. Recently, a statement was released from the last FOMC meeting clarifying the size of the monthly contraction. The Fed discussed the reduction of $15 billion per month divided between US debt instruments (10 billion per month) and mortgage-backed securities (5 billion per month).

Hawkish Fed members have used the latest data from the September retail sales report to speed up the date for reducing bond purchases. According to economists, retail sales were expected to decline by 0.2%, but the actual figures showed an increase of 0.7%.

One of the direct results of market sentiment convinced that the Fed will begin to taper the growth in US debt yields as early as next month. Currently, the yield of 10-year Treasury bonds is 1.574% per annum. This increases the value of gold for foreign investors. And as a fixed-income asset, it is becoming more attractive to investors all over the world.

The high performance of US stocks on Friday was another factor that reinforced the bearish sentiment on gold.

The Dow rose 1.09%, considering Friday's gain of 382 points.

The S&P 500 also increased by 0.75%:

and the NASDAQ finally added 0.50%:

Rising US stocks continue to create bullish market sentiment for this asset class.

Bitcoin futures are up 8.57%:

The Office of Education of the U.S. Securities Commission sent out a tweet last week saying that they would approve an ETF for bitcoin futures as early as this week. The tweet included a link to a June newsletter containing a risk disclosure statement for an electronic fund for bitcoin futures. Many believe that the link to the June S.E.C. bulletin is an announcement that they will soon approve a bitcoin ETF.

Any of the components or events mentioned in this article will directly lead to a decrease in the attractiveness of gold as an investment instrument or an inflation hedge.