Gold struggled to capitalize on its intraday positive move and quickly retreated to the lower end of its daily trading range, around the $1820-19 region during the early European session.
The offered tone surrounding the US dollar assisted the dollar-denominated commodity to gain some positive traction through the first half of the trading action on Tuesday. However, a combination of factors kept a lid on any strong gains for the XAU/USD, rather prompted some fresh selling at higher levels.
The prevalent risk-on mood was seen as a key factor that undermined demand for the safe-haven precious metal. The global risk sentiment remained well supported by the optimism over a strong economic recovery amid the progress in coronavirus vaccinations and expectations for a massive US fiscal spending plan.
This, along with surging US Treasury bond yields, further collaborated towards capping the upside for the non-yielding yellow metal. The prospects for the passage of the US President Joe Biden's $1.9 trillion stimulus package pushed the yield on the benchmark 10-year government bond to the highest level since February 2020.
From a technical perspective, the commodity's inability to attract any follow-through buying suggests that the near-term bearish bias might still be far from being over. That said, traders might still wait for a sustained weakness below the $1810 region before positioning for any further depreciating move for the XAU/USD.
In the absence of any major market-moving economic releases from the US, the broader market risk sentiment and the US bond yields will play a key role in influencing the metal. Apart from this, the USD price dynamics will also be looked upon to grab some short-term trading opportunities around the XAU/USD.
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Gold and silver mutual funds and ETFs witnessed the biggest outflows in three months in the week ended Feb. 10 as investors put their money into soaring equities and high-yielding bond markets.
Investors net sold $1.4 billion in precious metal funds in the week ended Feb. 10, according to weekly data available for 338 precious metal funds on Refinitiv Lipper.
On the other hand, investors put $43.1 billion in equities funds, as global stocks surged on optimism over vaccine roll-outs and hopes of a bigger fiscal package from the United States.
iShares Silver Trust saw outflows of $919.1 million, while SPDR Gold Shares had net sales of $621 million in the last week.
The outflows from precious metal funds also came as the U.S. Treasury yields hit an over 6-month high, on hopes large stimulus measures from the United States would accelerate the country’s economic growth.
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The data showed global bonds also had inflows of $18.03 billion in the week ended Feb. 10.
“‘Gold-as-a-safe-haven’ isn’t incredibly appealing for investors during an incredible economic recovery,” said TD Commodities in a report.
It also said gold remains negatively correlated to 5-year/5-year forward inflation swaps, reflecting gold’s less attractive investment profile as nominal yields rise.
On the other hand, investors have been piling into some platinum ETFs in the past few weeks, the data showed.
GraniteShares Platinum Trust had an inflow of $4.6 million in the week ended Feb. 10.
Platinum prices soared to their highest in nearly 6-1/2 years on Tuesday, fuelled by expectations a rebound in the global economy would stoke demand for the metal used in autocatalysts.
· Platinum rally pauses after scaling 6-1/2-year high
· Platinum retreated from a near 6-1/2-year high on Tuesday as prices hit a technical resistance, although expectations that a rebound in the global economy would stoke demand kept the autocatalyst metal supported above the $1,300 an ounce level.
· Platinum XPT= , used in catalytic converters for vehicles, was up 0.7% at $1,312.34 an ounce by 0706 GMT, but off the session high of $1,336.50, its best since September 2014.
· Prices hit a technical resistance near the $1,330 level, said Stephen Innes, chief global market strategist at financial services firm Axi said, adding that it was a temporary pause and prices could continue to rise further.
· The market was also weighing the roll-out of Johnson & Johnson (NYSE:JNJ)'s JNJ.N COVID-19 vaccine in top producer South Africa, he said. disruptions in South Africa, a recovery in auto sales and stricter emission regulations will keep prices supported, analysts have said. China implementing Phase 6 standard for both gasoline and diesel vehicles from January 2021, Platinum Group Metals loadings will be strong," said Soni Kumari, a commodity strategist with ANZ.
However, she said, "a swift recovery in mine supply and restart of Anglo (American Platinum)'s smelter to refine the stockpile of unprocessed platinum could pause this rally..."
If supplies take longer to return to normal levels, prices could soon hit $1,400, she added.
· Palladium XPD= climbed 0.4% to $2,396.72, having earlier hit a one-month high of $2,424.26.
· Spot gold XAU= rose 0.3% to $1,822.97 per ounce as the dollar .DXY eased against rivals. USD/
· U.S. gold futures GCv1 were steady at $1,822.60, while silver XAG= gained 0.3% to $27.66.
Limiting bullion's gains, benchmark U.S. Treasury yields rose to their highest levels since March. US/
"Provided the 10-year yields stay below 1.5%, markets are still willing to ride the inflation narrative and that is quite supportive for gold," Innes said.
· Minutes of the U.S. Federal Reserve's end-January monetary policy meeting are due on Wednesday.
Reference: Investing,FXStreet,Reuters
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