Gold prices have fallen on the strength of the future

Whether or not U.S. President Joe Biden's $1.9 trillion fiscal stimulus bill is passed is now the biggest issue on gold investors' minds.The latest news is that the bill, which passed the US Senate by a vote of 50 to 49, also received support from a number of voices in the new administration.

Treasury yields have risen sharply

The United States was the worst-hit country in the global outbreak of COVID-19 last year.To contain the outbreak, the United States was forced to shut down a lot of economic activity, resulting in large numbers of unemployed workers.In order to save the economy, the US government released a large amount of economic rescue funds. In addition to the $1.9 trillion financial rescue bill just passed, the US released $21 trillion of basic monetary liquidity and economic stimulus programs within 41 weeks.Day amount of money into the market, managed to bring down Treasury yields, a representative of the 10-year Treasury yield fell to 0.5% in August last year low, the 10-year Treasury inflation-protected securities (TIPS) yields run within the range of negative since march last year, since last September, the low level of around 1% - gold in August last year at an all-time high of $2075 / ounce.The negative correlation between gold and the 10-year TIPS yield was unusually strong during the outbreak.

However, with the introduction of a vaccine, the epidemic has been brought under further control, economic activity has resumed, and market inflation expectations (10-year Treasury yield -- 10-year TIPS yield) and Treasury yields have both risen.The yield on the 10-year Treasury note rose from 1% at the start of the year to 1.5% at the end of February, and has hovered above 1.6% in recent days.The rapid rise in Treasury yields has led to a shift in allocations in the U.S. market, with money flowing out of risky, frothy technology stocks and into safe-haven assets such as Treasurys.Since gold is typically a non-interest-bearing commodity, the market has also sold off, falling from a high of $1,959 an ounce in early January to a recent low of $1,676 on the evening of March 8, for a total decline of $283.Since last year's record high, gold has fallen about 19.2 per cent, just shy of a bear market.

The Fed repeatedly calmed markets

As the economy is recovering from the epidemic, in the face of the possibility of early interest rate increase, shrink the balance sheet rumors, the Federal Reserve has repeatedly spoken to calm the market.Last week, Mr. Powell told The Wall Street Journal's Jobs Summit that price pressures are likely to emerge as the economy recovers, but that those pressures are temporary and that raising interest rates requires the economy to return to full employment and inflation to a sustainable level above 2%.He does not expect either to happen this year.Mr Powell said interest rates would not rise until conditions were met and would only happen when the economy had "almost fully recovered".In addition, Cleveland Fed President Ben Mester said that "we are a long way from achieving our goals of full employment and price stability" and that "on the policy side, the Fed will need to provide sustained accommodation for some time."St. Louis Federal Reserve Bank President James Bullard agreed that the situation in the Treasury market was not a cause for concern, but he was keeping a close eye on disorderly behavior in the market.Atlanta Fed President Richard Bostick also said rising inflation is not a concern for now, but the Fed will continue to watch.These comments seem to tell the market that the Fed doesn't mind the current rise in inflation expectations and Treasury yields, and that future rate hikes will depend on actual CPI levels, not current inflation expectations.

The non-farm data were good but there were worries

U.S. nonfarm payrolls rose 379,000 in February, the biggest gain since October.Unemployment rate down to 6.2% vs. 6.3% expected;Average hourly earnings increased 5.3% year over year, in line with expectations;The revised figure for December and January was 38,000 higher than the initial estimate.The numbers look good, but total employment in the service sector is now at least 9 million lower than it was at the start of the outbreak, and even at the latest growth rate of 379,000, it will take more than 20 months to absorb the current massive unemployment.Meanwhile, the U6 unemployment rate, which represents a broader picture of unemployment, remains high at 11.1 per cent.The fact that we are so far from full employment before the epidemic calls into question the over-optimistic economic and employment targets of the past.

Medium - term rebound conditions are ripe

The gold/silver ratio, which reached 122 times during the epidemic, is now down to 66 times.In the meantime, the pattern of "weak gold and strong silver" is the embodiment of the strong industrial demand for silver.From the perspective of running rhythm, the gold price has dropped 283 USD/oz since the high point at the beginning of the year and 19.2% since the historical high point last year. The conditions are ripe for a bottoming rebound in the medium term.Silver is down 17.6% from this year's high, and it would not be surprising to see gold break back above $2,000 if it approaches its previous high of $30 / oz and the bullion ratio widens to 70 times.Overall, the government's massive new fiscal stimulus bill is likely to push Treasury yields and inflation expectations down again.At that point, the U.S. index will end its rally around the 90 mark and gold and silver will end its current decline and move up, but it remains to be seen whether it will be able to break through last year's epidemic highs.