Gold prices rose on Monday due to a surge in coronavirus Delta variant infections and a decline in U.S Treasury yields. Many countries struggle to control the COVID-19 variant and had to impose lockdown measures. The benchmark 10-year yields dropped to 1.2640%, their lowest level in almost two weeks. It lowered the opportunity cost of owning the non-interest-bearing gold.
But the yellow metal’s gains were capped by a stronger U.S. dollar. The greenback rose 0.1% and made the bullion more expensive for investors using rival currencies.
Spot gold is currently trading at $1,804.10 per ounce as of 0730 GMT.
OANDA senior market analyst Jeffrey Halley commented that some short-covering supported the precious, but there was no clear momentum in either direction. He added that risk aversion due to the Delta variant surge and rising inflationary pressures affected the financial markets in general, particularly those in Asia.
ANZ analysts predicted an upward movement in gold prices in the near term. The bullion gained today despite a strong dollar. And the American currency is likely to weaken as other central raise interest rates. Another tailwind for the metal is the growing talk about fiscal tightening and quantitative easing.
In physical trading, gold dealers in Indian offered discounts of as much as $5 per ounce last week. The increase in local prices dented the demand for the precious metal. In other major Asian hubs, prices barely moved. Premiums ranged from $1-2 an ounce in China, $1.20-1.80 in Singapore and $0.50 in Japan.
On the technical front, Ilya Spivak of DailyFX noted that gold prices produced an Evening Star candlestick pattern that indicates a potential downward trend. There is also a dense resistance block up to $1,870.75 per ounce, he added. However, a break from that resistance could pave the way for gold to climb through $1,900 an ounce, he predicted.
But Reuters analyst Wang Tao predicted spot gold might fall below $1,813 an ounce and down to $1,789. He explained that the metal failed to break the resistance price level at $1,833.
In a related development, the U.S. Commodity Futures Trading Commissioned reported that market speculators raised their bullish stance in COMEX gold for the week that ended on July 13. The holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, fell by 0.6% on Friday to 1,028.55 tons. It is the lowest level since May 14.