Gold Rises As Lower Yields Offset Rising Risk Appetite

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Gold prices edged higher on Wednesday as the benchmark U.S. Treasury yields slipped. It lowered the opportunity cost of owning the non-interest-bearing bullion and boosted its appeal. The decline in the dollar index also supported the yellow metal. It made gold less expensive for investors using rival currencies. The softer yields and dollar kept bullion prices above the key level of $1,800 per ounce.

Spot gold is currently trading at $1,803.10 per ounce as of 0810 GMT.

Jeffrey Halley, a senior market analyst at OANDA, is not convinced of gold’s attempt to recover previous losses. Traders are immediately cutting their long positions as soon they smell trouble intraday. However, the dollar appears vulnerable to Omicron, which could help the bullion move upward this week. But those gains are not sustainable.

Stephen Innes, a managing partner at SPI Asset Management, argued that gold could end the year better than expected. He explained that the metal would benefit from economists’ downgrading of U.S. growth forecasts. But analysts predicted gold trading to remain thin and range-bound this week.

On the technical front, DailyFX analyst Thomas Westwater suggested that the path of least resistance for gold is on the downside. The bullion has recovered close to the 200-day Simple Moving Average. But a Rising Wedge pattern is beginning to take shape, which indicates a possible decline below the support level. If the bullion avoids the fell, it could test a resistance level at $1,830 per ounce. He also mentioned that the metal’s relative strength index (RSI) and moving average convergence divergence (MACD) are oriented sharply lower.

Meanwhile, China’s net gold imports via Hong Kong dropped by 16.5% from 54.262 tons in October to 45.321 tons in November. A local trader said the government’s increased scrutiny of companies listed overseas and the clampdown on speculators affected the demand for gold. He expects imports to remain low in December and physical demand to improve ahead of the Lunar New Year.

In India, gold prices fell as international remained steady. Gold futures fell Rs 77 or 0.16%, from Rs48,042 to Rs 47,965 per ten grams. But local analysts expect elevated inflation and rising Omicron cases to push gold prices up in the new year. The predicted prices to move up to Rs 54,000 and beyond in 2022.