Gold drops towards significant support

Gold and silver have come under a renewed round of selling pressure today, principally on the back of dollar strength. There’s been a sell-off on bonds following yesterday’s Martin Luther King holiday with the yield on the US 10-year Treasury note back above 4.0%. Rising yields imply that the market feels that rates could stay higher for longer and this increases the attractiveness of the US dollar. In addition, the CME’s FedWatch Tool shows that the probability of a 25 basis point rate cut at the Fed’s March meeting has dropped to 69% today from 77% on Friday. Gold remains above key support which comes in the $2,000-2,010 region, while silver continues to trade either side of $23. Both could be vulnerable to further selling should the US dollar continue its recovery since the end of last year.