On Monday, gold prices jumped close to a 4-½-month peak as the U.S. dollar weakens and the Treasury yields decline. The greenback plunged near a three-month trough against the euro and other European currencies. It made the yellow metal less expensive for investors using rival currencies. Meanwhile, the benchmark 10-year U.S. Treasury yields dropped close to a one-week low. It lowered the opportunity cost of owning the non-interest-bearing bullion.
Spot gold is currently trading at $1,882.33 per ounce as of 0401 GMT.
Another headwind for gold is the slide in cryptocurrencies, which boosted the metal’s appeal as a safe-haven asset. Bitcoin, the best-known cryptocurrency, fell 13% yesterday and lost $4,899.54 from its previous close. It came under pressure after Tesla CEO Elon Musk suspended accepting Bitcoin for car payments. Also, the Chinese government banned cryptocurrency mining and trading. It came after the Federal Reserve flagged the negative impact of cryptocurrencies on financial stability. The U.S. Treasury Department also issued new rules requiring large crypto transfers to be reported to the Internal Revenue Service.
Meanwhile, Federal Reserve officials have lowered their expectations for employment growth in May. Dallas Federal Reserve President Robert Kaplan is expecting hiring difficulties to continue this month. Philadelphia Federal Reserve President Patrick called for the reduction in the central bank’s monthly bond purchases.
But despite the hiring problems, U.S. factory activity improved in May. IHS Markit reported that its U.S. manufacturing PMI increased to 65.1 in the first half of the month. It is the highest reading since October 2009. The manufacturing sector accounts for almost 12% of the American economy, and a reading above 50 indicates growth.
In physical trading, COVID-19 lockdowns and higher domestic prices dented gold demand in India. Most states have imposed restrictions as the number of infections crossed the 26-million-mark last week. Local gold futures prices climbed to their highest level since February at 48,875 rupees. The situation forced dealers to offer as much as $10 per ounce discount. It is the highest since September 2020.
On the technical front, Reuters technical analyst Wang Tao noted that spot gold prices appear neutral in the $1,875-$1,893. But a move away from that price range could point to the future price direction, he predicted.
In a related development, the U.S. Commodity Futures Trading reported that market speculators raised their bullish stance in COMEX gold contracts for the week that ended on May 18. The holdings of the largest gold-backed exchange-traded fund, SPDR Gold Trust, rose by 0.6% on Friday on 1,042.92 tons.