Gold inter-market: XAU/USD holds near 2017 highs despite yields

Gold has been rising constantly since the beginning of the year while US bond yields are currently at the same levels they had at the beginning of the year. During the third and fourth quarter of last year, the correlation between gold and yields was elevated (negatively). 

The rally in the yellow metal took place despite the movement in the bond market. XAU/USD opened in January at $1150 and today it closed at $1237, that represents a gain of  7.50%. The 10-year bond yield opened 2017 at 2.41% and last week closed at 2.42%. 

The rally in gold prices, could have been boosted in part by the correction of the US dollar. The US dollar index is falling 1.60% so far during 2017. Today it finished at 100.90 after bottoming at 99.15, early in February. 

From a technical perspective, the rally of gold was capped by the $1245 area. A break higher could lead to a test of a downtrend line from August highs, that stands at $1270. To the downside, a key short-term support is seen around $1220: a consolidation below could expose $1200.