• Gold pulls back after the news the PBoC has stopped purchasing Gold for the second month in a row. 
• The PBoC is one of the largest consumers of the precious metal and for 18 consecutive months until May accumulated Gold. 
• Gold forms a two-bar reversal pattern on the daily chart, which could indicate a short-term pullback. 

Gold (XAU/USD) is trading flat in the $2,360s on Tuesday – stabilizing after the heavy sell-off on Monday. Gold’s weakness at the start of the week came after the news that the People’s Bank of China (PBoC), one of the largest consumers of Gold in the world, had not bought any Gold for the second month in a row in June, after 18 consecutive months of reserve-building, according to data from the PBoC. 

Gold declines on impact of Trump on bond markets

Gold has also declined as a result of the US Treasury bond market absorbing political risk from an increased chance that former President Donald Trump will win the US presidential election in November. 

If Trump wins the presidency, he is expected to cut taxes and borrow, leading to a worsening fiscal position for the US. Critics say his fiscal profligacy will lead to higher inflation, which in turn will keep interest rates high. Gold is falling because it is a non-interest-bearing asset that becomes less attractive to investors when interest rates are high.  

The possibility of a Trump presidency is pushing bond prices down and bond yields up, benefiting the US Dollar (USD) because of its high correlation with yields. This, in turn, weighs on the Gold price, which is primarily bought and sold in USD.