Gold Eases as Dollar and Equities Firm

Gold prices

Gold prices slipped on Monday as the U.S. dollar and the stock markets strengthened. The greenback rose 0.1% and made the yellow metal more expensive for investors using rival currencies. Asian stocks rallied after Wall Street recorded historic closing peaks. Historically, there is an inverse correlation between equities and gold. But the bullion’s losses were checked by the surge in Delta variant infections that could hamper economic recovery.

Spot gold is currently trading at $1,803.78 per ounce as of 0931 GMT.

DailyFX strategist Margaret Yang said there could be lower demand for gold as a hedge against market volatility. But the near-term momentum has tilted to the upside since the MACD oscillator is on the upward trend, she explained. Yang predicted an immediate support level at $1,790 per ounce and resistance at $1,815. Gold prices have also formed an ascending triangle that could pave the way for the metal to climb to $1,815-1,830, she added.

Market participants will be monitoring the release of U.S. core inflation data and Fed Chair Jerome Powell’s semiannual Congressional testimony. They will be looking for clues on the central bank’s view on rising prices and economic development. It is worth noting that the Fed’s hawkish policy made June gold’s worst month since 2016.

In physical trading, gold demand weakened last week because of the price hike and premiums also eased in most Asian markets. Indian dealers charged only $1.5 per ounce. In China, the premiums dropped from $3-4 to $1 an ounce. The demand in the Chinese market was also affected by the Postal Savings Bank of China’s (PSBC) suspension of new precious metals account openings. The PSBC cited elevated trading risks and price fluctuations for its decision. Premiums ranged from $1.20-1.65 in Singapore and $0.25-0.50 in Japan.

In a related development, the U.S. Commodity Futures Trading Commission reported that market speculators raised their bullish stance in COMEX gold contracts for the week that ended on July 6.

The Bank of England’s Prudential Regulatory Authority announced that London banks that clear gold trades can apply for exemption from the NSFR rules. These are part of the Basel III regulations that would take effect in January 2022.