Gold Inches Higher on Soft Dollar

gold bar

Gold prices climbed around 0.4% on Monday as the U.S. dollar eased. The bullion has been on an upward trend since dropping to $1,786.60 on May 16. But despite recent gains, gold prices are still on track for a second consecutive monthly decline.

Spot gold is currently trading at $1,862.20 per ounce as of 0730 GMT.

City Index senior market analyst Matt Simpson commented that gold would likely remain around $1,850 until a new catalyst arrives. He cited the three-day holiday in the U.S. this week and the lack of top-tier data until Wednesday. Simpson also noted that gold’s traditional bearish month of June appears to have shifted forward by one month.

On the technical front, Reuters technical analyst Wang Tao predicted spot gold to test a resistance at $1,867 an ounce. A breach of that level could push the bullion towards the $1,887-$1,892 range.

FXStreet senior analyst Dhwani Mehta said gold prices might extend the previous week’s momentum. The bullion could build onto previous gains if the dollar and Treasury yields remain soft.

The bullion breached the 21-Daily Moving Average (SMA), which indicates further potential gains. However, the 14-day Relative Strength Index is closing in the midline, which suggests that the bullish potential may be limited. Mehta sees immediate resistance at $1,870. A move above that could push gold to retest the 100-DMA at $1,890 and then $1,900. But if the bullion falls below the 21-DMA, it could go down further to $1,842.

DailyFX market analyst Diego Colman agreed that gold prices could continue to recover. The weakening of U.S. economic activity could cool down the rate hike outlook, which will weigh on the dollar. But Colman warned that the movement of real yields remains a major headwind for the yellow metal.

In physical trading, physical gold demand in India faltered due to higher prices. Local prices rose from a three-month low of 49,572 rupees last week to 51,000 rupees per 10 grams. The retail market lost momentum as prices increased, and retail buyers wait for a correction.

In China, gold demand remained subdued because of the COVID-19 lockdowns. Only a few districts have opened in Beijing, and Shanghai is still in lockdown. Local gold traders offered discounts of around $2 per ounce.

In a related development, speculators raised their net long position in COMEX gold in the week of May 24.