Gold Stays Firm as Stronger Dollar Offset Lower U.S. Bond Yields

gold bars

Gold prices barely moved above the $1,800 level as the stronger dollar counterweighed the impact of lower yields. Benchmark U.S. Treasury yields dropped from their more-than-a-week high hit during the previous session. It boosted the demand for the non-interest-bearing bullion by lowering the opportunity cost of owning it. But the yellow metal’s gains were capped by the stronger dollar, which rose from its lowest level in almost a weak. It made the gold more expensive for investors using rival currencies.

Spot gold is currently trading at $1,806.84 per ounce as of 0840 GMT.

Jeffrey Halley, a senior market analyst at OANDA, noted the very thin liquidity this week. The slightest flow would cause a significant impact on intraday trading. He predicted that gold would struggle to breach the resistance at $1,815 unless the dollar slides sharply this week.

In physical trading, overall activity in major Asian hubs was subdued going into Christmas and the New Year. In China, gold premiums were unchanged because of weak demand. But local dealers expect gold buying to pick up in 2022 due to rising inflation and political concerns. Premiums in India were also unchanged. Though jewelers are slowly rebuilding their inventory, they remain cautious because of the rising Omicron cases. The situation in Singapore was worse. A local analyst described the market as “relatively moribund.” Dealers lowered their prices disguised as Christmas promotions to invigorate the market.

On the technical front, DailyFX head strategist Ilya Spivak noted that gold is struggling to find price direction. The bullion ended a two-year uptrend in August 2020 and then drifted sideways in March 2021. Now prices hang around the midpoint of a choppy range. It is hard to tell whether the standstill will be followed by renewed gains or a move down from the 2020 peak.

Spivak also mentioned that gold prices are moving upward near the $1,800 level. And if the bullion closes with higher highs and lows over the next trading days, it could stay within the $1,677-$1,917 range. He sees immediate resistance at $1,808.16, followed by blockades at $1,834 and $1,871. The key support levels are at $1,818.89, $1,750.78 and $1,676.91.