Gold Hovers Near 7-Week Peak on Lower Yields and Weaker Dollar

support and resistance

Gold prices rose on Monday on lower Treasury yields and a softer dollar. The bullion remains close to a seven-week high reached on Friday.  The benchmark 10-year yields fell to multi-weeks low that lowered the opportunity cost of owning the non-interest-bearing metal. The dollar index plunged to a one-month low that made gold less expensive for traders and investors using rival currencies.

Spot gold is currently trading at $1,786.36 per ounce as of 0811 GMT.

Despite the gold’s upward trend, the Asian stock markets remain upbeat. It is due to the expectations that monetary policy around the world will remain accommodative. The MSCI Asia-Pacific Index jumped to 699.70. The index has risen by 5.1% so far in 2021 and is on track for its third consecutive yearly gain.

CMC Markets chief market strategist Michael McCarthy commented that the lower interest rates and a weaker dollar are lifting the bullion despite the strong economic recovery. The yellow metal has the momentum, but it needs to stay above the $1,765/oz level to maintain a positive near-term outlook. ANZ analysts mentioned other factors supportive of gold. These include the increase in the consumer price index, the inflation expectations above 2.5% and Federal Reserve’s dovish monetary policy.

Meanwhile, the Feds reiterated its plan to keep an accommodative policy until the COVID-19 crisis is over. Fed Governor Christopher Waller said there is still “no reason to be pulling the plug” on the central bank’s support to the economy. Some parts of the economy have yet to recover, particularly the high unemployment rate among minorities. Also, the gross domestic product has not yet returned to pre-pandemic levels.

In physical trading, higher domestic prices and coronavirus restrictions dented the demand for gold in India. Dealers charged a premium of as much as $4 per ounce over official prices. In China, premiums fell to $7-9 an ounce over benchmark spot gold prices. There are also reports that the government authorized commercial banks to import large amounts of gold.

In a related development, the holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, dropped by 0.3% from 1,022.86 tons on Thursday to 1,019.66 tons on Friday. The U.S. Commodity Futures Trading Commission reported that money managers and hedge funds lowered their bullish positions in COMEX gold contracts for the week that ended on April 13.