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Gold Nears $1,800, Then Backs off as Yields Recover

Commodities1 hour ago (Apr 19, 2021 03:14PM ET)

By Barani Krishnan – Gold came less than $10 from returning to $1,800 an ounce on Monday, before retreating as U.S. bond yields gained ground after three woeful days of performance.

Benchmark gold futures on New York’s Comex settled down $9.60, or 0.5%, at $1,770.60 an ounce. It earlier scaled a seven-week high of $1,790.35, the closest it has come to the $1,800 territory since Feb. 26.

The spot price of gold wasn’t far from futures, trading down $4.67, or 0.3%, at $1,771.70 by 3:00 PM ET (19:00 GMT), after a peak at $1,790.06. Moves in spot gold are integral to fund managers, who sometimes rely more on it than futures for direction.

U.S. bond yields, measured by the 10-year Treasury note, hit a session high of 1.615% on Monday, after falling to a one-week low of 1.555%. The 10-year note was at a 14-month high of 1.77% on March 30.

“The outlook is becoming very bullish for gold, but in the short-term, prices could be in for a choppy period,” said Ed Moya, who heads U.S. markets research at online broker OANDA.

“While the fundamentals remain very strong for the U.S. economy and that is eating away at safe haven demand, the gold market is focused on the recovery across Europe and runaway inflation concerns across emerging markets. A stronger euro and hotter pricing pressures globally is what gold needs over the next several months to make a run towards the $1,900 level.”

Since the start of this year, gold has faced continuous headwinds as the dollar and bond yields often surged on the argument that the U.S. economic recovery from the pandemic could exceed expectations, leading to fears of spiraling inflation as the Federal Reserve kept interest rates at near zero.

Gold had a scorching run in mid-2020 when it rose from March lows of under $1,500 to reach record highs of nearly $2,100 by August, responding to inflationary concerns sparked by the first U.S. fiscal relief of $3 trillion approved for the coronavirus pandemic.

Breakthroughs in vaccine development since November, along with optimism of economic recovery, however, forced gold to close 2020 trading at just below $1,900.

This year, the rut worsened as gold fell first to $1,800 levels in January, then collapsed to below $1,660 at one point in March.

Such weakness in gold is remarkable if considered from the perspective of the Covid-19 stimulus of $1.9 trillion passed by Congress in March, and the Biden administration’s plans for an additional infrastructure spending of $2.2 trillion.

Typically, stimulus measures lead to dollar debasement and inflation that sends gold rallying as an inflation hedge. But logic-suspending selloffs instead took place in gold over the past six months.

The Dollar Index, which pits the greenback against the euro and five other major currencies, weakened to 91.07 versus Wednesday’s settlement of 91.54.

Gold Nears $1,800, Then Backs off as Yields Recover

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