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Gold prices at session lows following strong rise in New York Fed Empire State survey

Gold prices are trading at session lows following stronger than expected positive sentiment in the New York Region manufacturing sector, according to the latest data from the New York Federal Reserve.

Tuesday, the regional central bank said that its Empire State manufacturing survey’s general business conditions index rose to a reading of 12.1 in February, up significantly from January’s reading of 3.5. The data were also much better than expected as consensus forecasts were calling for a rise to 6.2.

The gold market was seeing some selling pressure ahead of the report; however, the positive economic numbers are having a modest impact on gold as prices push further into negative territory in initial reaction and test critical support.

 

·         Gold Price Analysis: XAU/USD stays depressed below $1,800, eyes US Treasury yields

The precious metal attacks the monthly low as a jump in the US bond yields, to the levels last seen during February 2020, signal an extra strength for the greenback, which in turn pleases the gold sellers.

Previously, improvement in the coronavirus (COVID-19) conditions and the jump in the covid vaccinations joined hopes of the US virus relief package to favor the bullion sellers. The downside move recently got the US dollar strength as the power fuel to direct the metal towards key supports.

The UK and Israel’s success in jabbing the vaccines gained support from receding virus infections. The US COVID-19 numbers are also declining off-late while the major vaccine producers stay ready to respect their delivery obligations. Even so, some of the Asia-Pacific countries, like Japan, Australia and New Zealand, battle the virus and keep the issue on the table for concern.

Elsewhere, America’s ex-President Donald Trump got acquitted for the Capitol Hill attacks, giving time for Congress to move on the much-awaited stimulus. Recent updates from CNN’s Manu Raju suggest that President Joe Biden’s covid relief plan is likely to be tested on the House floor by end of next week, and the chamber is preparing for final passage week of March 8 if Senate amends it.

Amid these plays, US 10-year Treasury yields grew over 11 basis points to close Tuesday’s North American trading session, the first in the week, at 1.311%. While the moves helped the US dollar index (DXY) to recover from the monthly low, Wall Street closed mixed.

Looking forward, gold traders will keep their eyes on the US Treasury yields for fresh impulse amid a light calendar in Asia. During the American session, the expected recovery in January’s Retail Sales needs support from FOMC minutes to keep the greenback bulls happy, which in turn can favor gold sellers.

 

Technical analysis

An ascending trend line from November 30, at $1,789 now, precedes the yearly bottom around $1,785 and the late-2020 low near $1,765 to challenge the yellow metal’s short-term downside. On the contrary, January’s low of $1,803 guard’s quote’s immediate upside while the convergence of 21-day SMA and January a six-week-old trend line, around $1,835, becomes the key hurdle.

 

·         Gold prices slump on rising yields while platinum retreats

Gold prices fell as much as 1.7% on Tuesday to their lowest in more than a week on stronger U.S. Treasury yields while platinum eased in choppy trading after a rally that took it to a 6-1/2 year high.

Spot gold fell 1.2% to $1,796.50 an ounce, having touched its lowest since Feb. 4. U.S. gold futures settled down 1.3% to $1,799.00.

·         “Gold is shifting away from being an inflation hedge asset, as has been the case for most of 2020, into a safe-haven asset once again,” said TD Securities commodity strategist Daniel Ghali, pointing to rising Treasury yields.

 

·         Bullion is considered a hedge against inflation expected from massive economic stimulus that has also pushed U.S. 10-year Treasury yields higher, increasing the opportunity cost of non-yielding gold.

Also weighing on gold, U.S. stock indexes opened at record highs on optimism surrounding a $1.9 trillion U.S. coronavirus relief package.

·         Platinum fell 1.6% to $1,281.80 an ounce after touching its highest since September 2014.

·         TD Securities’ Ghali said the drop was attributable to profit-taking after a rally driven by speculation over the potential for platinum demand to rise as a result of greener technologies.

The metal, which is used in automobile catalytic converters to limit exhaust emissions, has rallied more than 20% this year on hopes that a recovery in the car market and a push for cleaner energy would spur demand.

·         “While the upswing in the platinum price was fundamentally justified at first, given its previous undervaluation and the expectation of a renewed supply deficit, we now see signs of speculative excess,” Commerzbank analysts said in a note.

On the technical front, “the 14-day relative strength index (of platinum) is now in overbought territory, which should sound alarm bells”, they added.

·         Spot silver fell 0.8% to $27.36 an ounce while palladium slipped 0.4% to $2,378.37 after peaking at a one-month high of $2,424.26.

 

·         St. Louis Federal Reserve President James Bullard, who said in an interview on CNBC that U.S. financial conditions were “generally good,” and that inflation was likely to heat up this year.

 

·         Fed's Daly says don't be fearful about too-high inflation

San Francisco Federal Reserve President Mary Daly on Tuesday pushed back against critics warning low interest rates and government spending could overheat the U.S. economy and spark high inflation.

 

·         Dollar gains as Treasury yields rise; bitcoin breaches $50,000

The U.S. dollar rebounded from three-week lows on Tuesday as Treasury yields hit pre-pandemic highs and bullish economic sentiment boosted investor risk appetite.

Against a basket of its rivals, the dollar gained 0.21% to 90.508, after earlier falling to 90.117, its lowest level since Jan. 26.

Bitcoin breached $50,000 to touch an all-time high of $50,602, but had last pulled back to $48,675.18. The world’s largest cryptocurrency has risen around 68% so far this year, boosted by Tesla Inc’s announcement that it had bought $1.5 billion in bitcoin.

·         Democrats focus on passing Covid relief bill after Trump’s acquittal

With former President Donald Trump’s second impeachment trial behind them, Democrats are moving to pass another coronavirus relief package within weeks.

The Senate on Saturday acquitted Trump of inciting an insurrection against the government after five days of proceedings. Both Democratic-held chambers of Congress and President Joe Biden will now turn their full attention to pushing a $1.9 trillion aid bill through before key unemployment programs expire on March 14.

On Tuesday, House Majority Leader Steny Hoyer, D-Md., told lawmakers to prepare to work through Feb. 26 and into the ensuing weekend in order to pass the relief bill. House Democratic Caucus Chair Hakeem Jeffries will hold calls this week with members of committees putting together the legislation, NBC News reported.

 

·         CORONAVIRUS UPDATES:

Global Cases: 110.00 (+329,384)

Global Deaths: 2.42M (+9,342)

U.S. Cases: 28.37M (+57,794)

U.S. Deaths: 499,756(+1,552)

 

India Cases: 10.93M (+11,795)

Brazil Cases: 9.92M (+55,271)

Mexico Cases : 1.99M (+3,098)

Japan Cases: 417,765 (+1,983)

South Korea Cases: 84,325 (+456)

 

Thailand Cases: 24,786 (+72)

Thailand Deaths: 82

 

 

·         New COVID-19 cases in U.S. fall for fifth week in a row

 

·         Moderna says U.S. supply of its vaccine doses have lagged recently

Moderna Inc said on Tuesday the release of some of its COVID-19 vaccine doses to the U.S. government have lagged recently because of “short-term delays” in the final stages of production at its contractor Catalent Inc.

The delays are expected to be resolved soon and will not impact monthly delivery targets, the company said, adding it was aiming to deliver 300 million doses by the end of July, instead of September end.

 

·         Australia's Victoria reports no coronavirus cases, set to ease curbs

 

·         White House says Ebola outbreaks in Africa need swift action to avoid ‘catastrophic consequences’

·         Biden administration won’t rule out retaliation for rocket attack in Iraq

“The president of the United States and the administration reserves the right to respond in a timely manner of our choosing,” said White House press secretary Jen Psaki.

 

·         China overtakes U.S. as Europe’s main trading partner for the first time

China dethroned the U.S. last year to become Europe’s top trading partner for the first time, data from the European statistics office has shown.

European Union exports to China grew by 2.2% last year and imports rose by 5.6%. In comparison, exports to the U.S. dropped by 8.2% and imports fell by 13.2%. The latest figures, released Monday by Eurostat, showed that China now has an even bigger role in how European economies perform.

 

·         Southeast Asia would choose the U.S. over China if forced to pick sides, survey shows

 

·         Texas deep freeze leaves millions without power, some snowboarding behind pickups

A historic winter storm has killed at least 21 people, left millions of Texans without power and spun killer tornadoes into the U.S. Southeast on Tuesday.

 

·         Continental Resources sees higher 2021 output as oil recovery heats up

U.S. shale producer Continental Resources Inc raised its capital budget and forecast a rise in its crude oil and natural gas output this year, building on a recent recovery in commodity prices from pandemic-led historic lows.

Crude prices have rallied to their highest level in almost a year, sparking optimism among shale producers after a slump in fuel demand. A harsh winter weather gripping some U.S. states has also raised natural gas demand and prices to record levels.

 

·         Japan's factory mood turns positive for first time since 2019 - Reuters Tankan

Sentiment among Japanese manufacturers turned positive in February for the first time since mid-2019, the Reuters Tankan poll found, lifted by improving overseas demand though caution about the ongoing fallout from the coronavirus persisted.

 

·         Myanmar military promises new election; Suu Kyi faces additional charge

 

Reference: CNBC, FXStreet, Reuters, Kitco, Worldometers