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Gold steady as inflation bets counter firm U.S. dollar, yields

 

·         Gold prices held steady on Monday, buoyed by concerns over inflation after U.S. President Joe Biden announced a $2 trillion-plus jobs plan last week, while a stronger dollar and elevated U.S. Treasury yields limited bullion’s upside.

 

·         Spot gold was flat at $1,728.60 per ounce, as of 0146 GMT. Gold futures edged up 0.1% to $1,729.50 per ounce.

 

·         The U.S. economy created the most jobs in seven months in March as more Americans got vaccinated and the government doled out additional pandemic relief money, marking the start of what could be the strongest economic performance this year in nearly four decades.

 

·         Shorter-dated U.S. Treasury yields held near 14-month peak, while the dollar was poised to extend gains against major currencies on Monday after the U.S Labor Department reported stronger-than-forecast jobs growth in March.

 

·         Gold is seen as a hedge against rising inflation, but firmer Treasury yields, which translate into a higher opportunity cost for holding bullion, have challenged that status.

 

·         Despite the strong numbers the data will not alter the Federal Reserve’s stance on monetary policy, Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA in New York said.

 

·         President Biden’s $2 trillion infrastructure plan initiatives that are widely popular, according to a Reuters/Ipsos poll, but U.S. public support declines when the initiatives are packed into a Democratic bill and sold as a Biden-backed plan.

 

·         However, new COVID-19 restrictions in France will impact economic growth this year but it is too early to say by how much, Finance Minister Bruno Le Maire said on Friday.

 

·         Japan’s services sector activity fell in March, a private survey showed, but taking some shine off the precious metal were signs that the pace of the downturn was the slowest since January 2020.

 

·         Money managers in the gold, silver and copper markets cut their net long futures and options positions in the latest week, according to data from the Commodity Futures Trading Commission.

 

·         Gold Price Analysis: XAU/USD snaps two-day uptrend above $1,700 on US dollar recovery

 

Gold prints a corrective pullback from an intraday low of $1,723 to around $1,725, down 0.23% intraday, during the early Monday. Even so, the yellow metal drops for the first time in three days as the US dollar trims Friday’s losses amid fresh coronavirus (COVID-19) fears and a lack of major data/events during the Easter Monday holiday.

 

Having recovered from 92.83 on Friday, the US dollar index (DXY) picks up bids to 93.01 by press time. While strong US employment figures and a pullback in the US Treasury yields could be spotted for the greenback’s recovery moves on Friday, the latest run-up in the US 10-year bond coupon seems to renew reflation fears and favor the USD due to its safe-haven allure.

 

Also challenging the market sentiment could be the record increase in India’s covid cases and two-month high infections in China. Further, an off in major markets for the second consecutive day pushes global traders towards consolidation ahead of another important US data.

 

It’s worth mentioning that the covid woes in Europe and the Sino-American tussles are an extra burden to the market sentiment.

 

Amid these plays, S&P 500 Futures print 0.40% intraday gains whereas the US 10-year Treasury yields regain 1.72% level by the time of writing.

 

Moving on, ISM Services PMI, expected 58.5 versus 55.3 prior, for March will be crucial after the recent improvement in the US data. Any disappointment should have an easy way to recall the gold sellers.

 

Technical analysis

Failures to provide a daily closing beyond 21-day EMA, around $1,730 by the press time, favors the gold sellers targeting March bottom near $1,675.

·         Gold Price Technical Analysis

 

Gold prices rebounded from a key support level at US$ 1,676 and extended slightly higher. Prices may continue to be range-bound between US$ 1,676 and 1,744 in the near term, with the floor and ceiling serving as immediate resistance and support levels. The primary trend remains bearish-biased however, as suggested by the downward-sloped 50- and 100-day SMA lines, although the 20-day SMA seems to be flattening.The MACD indicator is trending higher beneath the neutral midpoint, suggesting that selling pressure is fading and momentum is tilted towards the upside.

·         Silver rose 0.2% to $25.01, while platinum climbed 0.4% to $1,214.03 and palladium was trading flat at $2,666.43.

 

 

Reference:  CNBC, FX Empire, FXStreet, DailyFX