Gold inter-markets: remains vulnerable to slide further

Gold extended post-US presidential election sell-off and dropped to its lowest level since late May before witnessing a bounce back to currently trade with mild negative bias around $1214-15 region.

Speculations of aggressive fiscal spending by Trump administration has been fueling inflationary expectations and driving the US longer-term (30-years) Treasury bond yields to yearly highs. Sell-off in treasuries, coupled with market expectations of an imminent Fed rate-hike action, has been the key factors driving flows away from non-yielding asset, gold. 

On Friday, retracing bond yields and a broad based greenback pull-back, as depicted by a profit-taking slide in the USD/JPY major, is supporting the precious metal's recovery from multi-month low. A weaker greenback tends to benefit dollar-denominated commodities - like gold. 

Adding to this, a minor bounce in the Volatility Index (VIX), restricting risk-on rally in the broader US equity index (S&P 500), is boosting the metal's safe-haven appeal and justifying the bounce back from session through.

However, with the Federal Reserve all set to raise interest rates at its December meeting, renewed US Dollar buying interest might restrict any swift recovery for the precious metal. Moreover, a fresh bout of selling pressure in treasuries and improving investors' risk appetite would further weigh on the metal. 

Hence, it would be prudent to conclude that any recovery is likely to be short-lived and the commodity remains vulnerable to further extend its near-term downslide even from current levels.

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