Gold Loses Momentum on Firm Dollar and Higher Treasury Yields

bearish market

Gold prices lost some of the gains made yesterday as the U.S. dollar continues to strengthen and the Treasury yields recover. Concerns about the negative impact of the Delta variant on global economic recovery would have been positive for the bullion. But the dollar overshadowed its appeal as a safe-haven asset. The greenback rose 0.1% to stay near a 3-1/2 month high. It made the yellow metal more expensive for investors using rival currencies. Meanwhile, the 10-year Treasury bonds bounced back from a five-month trough and increased the opportunity cost of holding the non-interest-bearing bullion.

Spot gold is currently trading at $1,806.99 per ounce as of 0740 GMT.

IG Market analyst Kyle Rodda noted that the dollar outclassed gold as a safe-haven asset. It is because of the expectation that the U.S. economy will outperform the global economy, he explained.

Meanwhile, market participants are now focusing on the upcoming meeting of the European Central Bank. Experts expect the central bank to keep interest rates and its asset-buying program untouched. But they are eager to see the fight between the doves and the hawks over the interpretation of the monetary policy strategy.

In Japan, BOJ officials expressed concerns over the impact of global commodity price hikes on the country’s inflation rates. In Russia, the central bank reported that its gold reserves at the start of July were 73.7 million troy ounces.

On the technical front, Reuters technical analyst Wang Tao predicted that spot prices might break the support level at $1,805 an ounce and slide towards the $1,795-1,800 range.

Margaret Yang of DailyFX added that gold prices appeared to have entered a technical pullback after breaking an ascending channel. The MACD indicator suggests a weak bullish momentum. She sees an immediate resistance level at $1,835 and support at $1,810 and then $1,796.

In a related development, Swiss gold exports to China fell in June. Exports to India rose slightly but were lower compared to previous months. Shipments to the top two gold consumers plunged due to the pandemic, and Swiss exports shifted to the U.S. and the UK.

In Canada, Barrick Gold resumed operations at its Hemlo mine. The miner stopped operations last week after a worker fatality on July 14. Hemlo produced 223,000 ounces of gold in 2020. Barrick will provide a full-year production estimate for 2021 in August.