Gold prices fell to a one-week low on Wednesday, weighed down by firmer U.S. Treasury yields with investors awaiting policy cues from the Federal Reserve’s statement, while palladium eased after scaling a record high in the last session.
Spot gold was down 0.3% to $1,771.50 per ounce by 0348 GMT, having fallen to its lowest since April 20 at $1,765.70 earlier in the day. U.S. gold futures eased 0.4% to $1,771.20 per ounce.
“Strong U.S. consumer sentiment data... and higher commodity prices are pushing yields up and gold prices down as a result,” said IG Market analyst Kyle Rodda.
Benchmark U.S. 10-year Treasury yields jumped to their highest since April 15. While gold is considered a hedge against inflation, higher yields challenge that status as they increase the opportunity cost of holding bullion.
U.S. consumer confidence soared to a 14-month high in April, as more businesses reopened.
The dollar index rose 0.1% against its rivals, making gold more expensive for holders of other currencies.
Investors now await the Fed’s statement due later in the day which is expected to provide cues on the central bank’s monetary policy outlook.
The market will be “looking for signals that maybe the Fed is starting to think about tapering or when they should taper”, said IG Market’s Rodda.
Analysts and traders have slashed their gold price forecasts, with many believing a return to last year’s record highs is unlikely as economic recovery tarnishes the safe-haven metal’s appeal, a Reuters poll showed.
Meanwhile, Japanese retail sales rose at the fastest pace in five months in March as consumer demand recovered from the hit it took from the pandemic.
Gold: A break above 1806 signals further gains
Daily analysis
Gold breaking support at 1770/68 to target 1760 then 1755/53.
Bulls need the Gold price to recover & hold above 1770 to regain control, targeting resistance at 1778/81. Above 1783 opens the door 1788/89 before the strongest resistance for this week at 1792/96 coupled with strong 100 day moving average resistance at 1801/03. A high for the week could be seen here so it is worth profit taking on longs. However a break above 1806 signals further gains, initially to 1815.
Silver holding strong support at 2610/00 & the strongest resistance for this week at 2650/60 so these are the important levels again for today. A break above 2670 targets 2685/95. A break above 2705 is the next buy signal.
Strong support at 2610/00 but longs need stops below 2580. Next downside target & support at 65/60 but below 2555 look for 2540/2735.
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Fed’s decision to trigger a fresh direction in gold, Biden’s speech also eyed “The focus will also remain on fresh updates on the fiscal stimulus, as Biden is set to address Congress later on Wednesday.”
“Buyers continue to lurk on every dip towards the 21-DMA. The 100-DMA and 21-DMA lie at $1801 and $1753 respectively. Gold’s fate hinges on the Fed’s announcements while acceptance on a break of either of the two barriers could trigger sharp moves.”
“Although the Fed is unlikely to alter its policy stance, investors will pay close attention to any hints on a likely tapering of the bond-buying program, given the optimism over improving economic outlook.”
· Palladium fell 0.3% to $2,931.82 per ounce, after hitting an all-time high of $2,962.50 on Tuesday.
· Silver fell 0.9% to $26.01 per ounce. Platinum was down 1% to $1,216.58.
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