Gold - At 5-day high, nears 200-DMA

Gold is extending the two-day winning streak in Asia, now trading just a few points short of the 200-DMA level of $1258.15/Oz.

Treasury yields drop

US treasury yields are on the back foot this Tuesday morning in Asia, with 10-year yield down 2.2 basis points (bps). The 30-year yield is down 2.2 bps, while the 2-year yield is down one basis point. Meanwhile, the 5-year yield fell 2 basis points. The drop in the treasury yields usually strengthens the safe haven yellow metal.

Rising inflation

The other major factor that is keeping the metal well bid is the fact that inflation continues to move higher in the US. The US Markit manufacturing PMI report released yesterday showed the input cost inflation hits two-and-a-half year high. The ISM details also showed the prices paid component at highest level since mid-2011.

However, caution is advised as the 10-year breakeven inflation rates are back below 2%.

The US data docket is thinner today; hence the focus remains on the treasury yields and the broader market sentiment.

Gold Technical Levels

The metal was last seen trading around $1256/Oz levels. A breakdown of support at $1253.25 (session low) could yield a re-test of $1247 (strong support on 4-hour chart), under which the losses could be extended to $1239.88 (Mar 31 low). On the higher side, breach of 200-DMA level of $1258.15 would open up upside towards $1284 (Mar 2016 high) and $1300 (zero figure).