Gold futures ended lower on Friday, easing from a two-week high reached in the previous session, with some investors recording profits before the week and the strength of the US dollar against a basket of major currencies.
The losses may have been limited by the hope that a new stimulus could come from the Biden administration, although there could be problems with the timing of coronavirus relief and the size of the package.
On Friday, April’s Comex gold closed at $ 1856.20, down $ 13.10 or -0.70%.
Better-than-expected economic data from the US may also have limited gains, as they point to an improving economy, although unemployment data on Thursday indicate that the weakening labor market may continue to be an obstacle to economic growth. economy.
Gold traders are also seeing an increase in coronavirus cases in China and the Eurozone. China alone could put pressure on the global economy, which would increase the need for more fiscal and monetary stimulus worldwide. The eurozone is probably heading for another recession, which could weigh on the euro, boosting the US dollar index.
The biggest influence on gold will be the direction of treasury yields
The 10-year Treasury’s yield fell on Friday morning, when President Joe Biden’s $ 1.9 trillion stimulus package faced opposition in Congress just a week after he announced the plan.
The yield on the 10-year reference Treasury note fell to 1.086%, while the yield on the 30-year Treasury bills fell to 1.847%.
The drop in Treasury yields came when moderate Republican senators criticized Biden’s plan, while another Democratic lawmaker said he would oppose another coronavirus relief check for Americans.
Here is the tricky part that can confuse gold traders.
If Biden gets his $ 1.9 trillion stimulus package, in other words, whatever he’s asking for, inflation could go up. If inflation rises, Treasury yields will rise, helping to support the US dollar. A stronger dollar will reduce foreign demand for dollar gold.
If the Biden plan has difficulties in Congress and a smaller package is approved, the shares could back down, meaning that the demand for risky assets would fall. This would also send investors to the security of the US dollar and, once again, gold prices could be limited.
Short-term perspective
At the moment, there is no clear bullish catalyst for gold, so a bullish bull may find it difficult to gain strength. The long-term fundamentals are optimistic enough to provide support, but an uncontrolled increase like the one we had last year, from April to August, is simply not in the plans now.
For a look at all of today’s economic events, check out our economic calendar.