Gold prices made some early gains as the U.S. dollar weakened but lost them as benchmark 10-year U.S. Treasury yields rose slightly. The dollar index plunged to a three-week low and made the yellow metal less expensive for investors using rival currencies. However, the yield increase lifted the opportunity cost of holding the non-interest-bearing bullion.
Spot gold is currently trading at $1,746.64 per ounce as of 0847 GMT.
There are currently several factors that favor an upward trend in gold prices. The better-than-expected U.S. consumer price growth in March set off expectations of higher inflation. It supports gold being a traditional hedge against inflation. Federal Reserve Bank of Philadelphia President Patrick Harker said that the Fed would maintain its policy for now. The American economy is projected to grow around 5-6% this year. But Harker said there is no reason to withdraw support since the recovery is still in its early stages. Last month, the Feds announced that it would keep interest rates near zero and continue its $120 billion monthly bond purchases.
DailyFX strategist Margaret Yang noted how the yield uptick muted the bullion’s upward movement. She predicted that the next big thing for gold would be the release of U.S. retail sales data tomorrow. It could put some pressure on the precious metal it beats analysts’ expectations. But the decline would be limited since the bullion double-bottomed at $1,680/oz. Market participants are also monitoring the Fed’s release of the Summary of Commentary on Current Economic Conditions later today.
Avtar Sandu of Phillip Futures said gold needs to test the $1,760/oz price level to regain upward momentum.
Meanwhile, U.S. health officials recommended a few days pause on the use of Johnson & Johnson’s COVID-19 vaccine. Six women under 50 developed rare blood clots after getting the shots. Peter Marks said the J&J cases were “very similar” to the AstraZeneca ones. He is the director of the Center for Biologics Evaluation and Research (CBER) at the Food and Drug Administration. There were no similar cases among recipients of the Pfizer/BioNTech of Moderna vaccines. This setback in the pandemic efforts supports safe-haven gold.
However, there is another headwind for the yellow metal. China’s exports soared to a four-year peak to boost its recovery from the pandemic. Exports increased by 30.6% in dollar terms. The second-largest economy in the world also reported a trade surplus of $13.8 billion in March. Also, bitcoin extended its 2021 rally and hit a new record of $62,741 yesterday. It happened just a day before Coinbase’s listing on the Nasdaq.