August 3, 2022
  • August 3, 2022

Hindered by a recovering dollar

By on May 3, 2021 0

Despite failed attempts to rebound gold, the opportunity remains.

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Gold’s weak attempts to rebound higher during trading last week did not break through the resistance level of $ 1,790, and last Thursday’s session was disastrous. In general, the rise in yields on Treasuries and that of the US dollar affected the trajectory of the precious metal. Many indicators point to a possible rally in the price of gold later in the second quarter, but investors can take a wait-and-see approach to global financial markets with trading starting in May.

The price of gold recorded a weekly loss of around 0.5%, but it posted gains in April of more than 2%. From the start of 2021 to date, the price of gold has fallen by 7%. Silver, the sister commodity of gold, is one of the few commodity assets that finds precise direction to close weekly and monthly transactions. Silver futures reached $ 26,145 an ounce. The price of silver saw a weekly jump of 0.4% and a monthly increase of 4.4%, but it is still down 1.4% this year 2021 so far.

One of the factors that strongly affects the metals market is US bonds. The US bond market is heading mostly green, with the record 10-year Treasury yield reaching 1.645%. The yield on the one-year notes increased to 0.053%, while the yield on the 30-year notes was 2316%. Higher bonds are generally bearish for unprofitable gold because they can increase the opportunity cost. The price of the US dollar also has a strong influence on the price of gold. The US Dollar Index (DXY), which measures the performance of the US currency against a basket of six major competing currencies, rose to the level of 91.23, and as we know, a strong dollar is bad for commodities valued in dollars because it makes the purchase more expensive for foreign investors.

Although ETFs rallied over the past month, Commerzbank reported that gold ETFs monitored by Bloomberg registered around 30 tonnes of outflows last week.

Relative to the prices of other metal commodities, copper futures contracts reached $ 4,055 per pound. Platinum futures fell to $ 1,214.40 an ounce and palladium futures fell to $ 2,979.50.

U.S. Treasury Secretary Janet Yellen said yesterday that President Joe Biden’s proposed massive spending on infrastructure, families and education will not fuel inflation as plans will be phased over 10 years. New economic reports have painted a rapid recovery from the recession caused by the pandemic. Americans’ incomes grew the most on record in March, supported by federal stimulus payments of $ 1,400, and the economy grew at a high annual rate of 6.4% in the first three months of the year , which raised concerns about inflationary pressures.

Some economists, including former Treasury Secretary Larry Summers, have warned that the Fed’s current ultra-low interest rates, combined with the $ 4 trillion proposed by the Biden administration in new spending, on top of $ 5 trillion, already approved by Congress, risked accelerating inflation.

Biden outlined his expansion plans in a speech he gave to Congress last week. It will expand the social safety net for children, raise taxes for the rich, and fund projects that embrace an ambitious definition of infrastructure, with a focus on long-term economic stability with jobs for the middle class.

Technical analysis of gold:

On the daily chart, despite failed attempts to rebound gold, the opportunity remains. The bullish outlook will end if the price of gold collapses to the support level of $ 1,720. On the upside, a return to test the $ 1,785 resistance level is important for bulls to break into the $ 1,800 psychological resistance level. All in all, I would still prefer to buy gold over all the downsides.

The price of gold will today be affected by the market’s appetite for risk, as well as by the strength of the US dollar and the reaction to the announcement of the PMI reading for both the Eurozone and the States. United of America.