Gold Price Analysis: XAU/USD clings to $1,740 amid firmer US dollar
Gold started the new trading week on a subdued note and traded with mild losses in the early European session. The strength in the US dollar continued to squeeze the price for the precious metal near the $1,750-45 region.
At the time of writing, gold is trading at $1,741.60, down 0.18% on the day.
Yields on the US 10-year notes retreated from 1.67% to 1.65% after FED Chair Jerome Powell downplayed inflation and reaffirmed that the central bank would maintain its accommodative monetary stance. This, in turn, sent the benchmark yield into a corrective mode, thus boosting the demand for gold as an inflation-hedged instrument.
Gold attracted investors amid a slump in prices, which drove the demand. India reported a surge in gold imports in March to the highest level in almost two years as falling prices boosted the demand for jewelry during the ongoing wedding season.
Investors remained reclusive to equities as the rising number of coronavirus cases raised doubts over the economic recovery across regions. Gold gains at the expense of the riskier asset.
On the other hand, the upbeat US economic outlook continued to benefit the greenback, which kept gold’s upside momentum in check.
· Commodities Week Ahead: Oil Caught Between U.S. Growth, EU Virus; Mid-$1700 Gold
The debate on whether Europe is even close to getting a handle on the coronavirus versus the prospect for US economic growth in the second quarter will likely shape the direction for oil prices this week, as crude markets try to break free from their low $50s to mid-$60 range.
As for gold, there’s little immediate hope for the yellow metal to move decisively beyond the $1,750-ounce level it briefly pierced last week, with US Treasury yields and the dollar seen staying volatile after the latest mixed views on the economy by Federal Reserve Chair Jerome Powell.
· Gold Weakens Even as US PPI Raises Concerns About High Inflation
Gold is trading bearish early on Monday as a stronger than expected PPI reading strengthened the US dollar and sent Treasury yields higher over concerns of an uptick in inflation. At the time of writing, GOLD is trading at a little above $1,739.
Producer prices across the US posted a stronger than expected increase during the month of March, rising by 1% as opposed to a 0.5% increase seen in the previous month and forecast by economists for the period. The surge in PPI raised expectations for inflation to jump higher across the nation as economic activity resumes, powered by massive stimulus programs and vaccine rollouts.
While gold is typically seen as a hedge against inflation, increasing concerns about a rise in prices in the coming months have been sending US Treasury yields to multi-month highs. This in turn has been exerting a downward pressure on the yellow metal prices as higher bond yields raise the opportunity cost of holding non-yielding bullion, making it less appealing as an investment.
However, the safe haven appeal of gold receives some support from recent cautious comments from Fed Chair Jerome Powell, who indicated that inflation and hiring activity could pick up in the coming months but reopening the economy too quickly could drive a resurgence in cases again. In addition, a rise in fresh coronavirus infections across some Asian countries, especially India, is also weighing on the market sentiment, heightening fears of more lockdowns and restrictions which could halt economic activity.
Reference: FXStreet, FXEmprie, Investing
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