(Kitco News) Gold is back on investors’ radar, as prices seem to end the week on a strong technical note, despite another increase in bond yields.
After trading at nearly three-week highs after the Federal Reserve’s dovish declaration, gold managed to ignore the 10-year yield from the U.S. Treasury, rising to its 14-month high of 1.75% on Friday. At the time of this writing, April’s Comex gold futures were trading at $ 1,742.60, up more than 1% for the week.
The Fed revised its GDP and inflation expectations for 2021 to 6.5% and 2.4%, respectively, but stressed that rates would remain close to zero until 2023. Fed President Jerome Powell continued to refer to any price spikes as transitory, ignoring rising yields.
On Friday, the Fed launched another curved ball on the markets by refusing to extend a temporary exemption from the bank leverage rule that expires at the end of the month. The rule excluded US Treasury bills and central bank deposits from the “supplemental leverage index”, which helped to encourage bank loans during the pandemic. In response, yields continued to rise and the stock market was sold.
In light of that, gold performed decent, staying above $ 1,730 an ounce, while stocks and oil fell. Blue Line Futures’ chief market strategist, Phillip Streible, told Kitco News.
“Gold as an asset class rose in the investor list. The precious metal was irrelevant for many weeks ago; there was more action in other markets. But now, it has risen again. Gold is a player on the field again after staying in the bank. for a while, “said Streible.
Some investors are starting to look for gold amid this market volatility, he added.
Gold has been trading well against other commodities as well, including silver and copper, said LaSalle Futures Group senior market strategist Charlie Nedoss.
“The 10-day moving average is starting to rise and I predict a close above 20 days for the first time since January 7,” said Nedoss, adding that these are great signs for gold.
In addition, geopolitics is back on the radar when it comes to trading gold, analysts point out. Senior US and Chinese officials clashed during the first high-level meeting with Joe Biden’s government.
“We will … discuss our deep concerns about China’s actions, including in Xinjiang, Hong Kong, Taiwan, cyber attacks in the United States, economic coercion from our allies,” said US Secretary of State Antony Blinken during the meeting, which took place in Anchorage, Alaska.
In response, China’s top diplomat, Yang Jiechi, said: “The United States uses its military strength and financial hegemony to fulfill long-arm jurisdiction and suppress other countries. It abuses so-called notions of national security to obstruct normal trade. and incite some countries to attack China. “
These tensions arise just a day after Joe Biden said Russian President Vladimir Putin was a murderer during an interview with ABC News.
After the comments, Putin said he had last spoken to Biden by phone at the request of the President of the United States. More conversations are said below. “I want to offer President Biden that we continue our discussion, but on the condition that we do it live, online, without delay,” said Putin.
With interruptions in the COVID-19 pandemic taking precedence, geopolitical tensions have been low, but if that is about to change, the price of gold may react positively, analysts told Kitco News.
“With the concerns of the trade agreement, the US-China talks did not start very well,” said Nedoss.
Geopolitical uncertainty is turning to gold, said Streible. “Geopolitics is ahead and center now, as are yields and market volatility. If volatility drops, yields are likely to continue to rise. If there is another outbreak in the geopolitical sense, there may be some security buy,” he said. .
Price levels to watch
Gold is still at risk of going in any direction, added Streible. “It could drop to $ 1,700 easily if yields continue to rise. But a push to $ 1,750 could reignite the bullring.”
The fact that gold did not reach $ 1,700 this week is very good, said Nedoss. “On the downside, I don’t want to see a close above yesterday’s lows, below $ 1,720. If we can close above $ 1,750 an ounce, it would be big for gold,” he noted.
Speech by Fed, duo Powell-Yellen
Next week, there will also be a list of Federal Reserve speakers, including a joint appearance by Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen on Wednesday.
“Given the upward movement in long-term bond yields, it will be interesting to see if this is making them nervous. We will almost certainly hear a narrative that inflation risks are exaggerated, but in an economy with a tight supply that is experiencing huge stimulus-induced demand, we certainly think inflation will be higher and more sustained than the Fed has publicly declared, “said ING economists on Friday.
Next week’s data
All eyes will be on the US fourth quarter GDP data on Thursday and the PCE price index on Friday.
“Personal income and expenditure data will reverse after the $ 600 stimulus checks increase in January data. This weakness will not last long, as the last $ 1400 stimulus payment hit bank accounts last week with the March data to be even stronger than January for revenue and spending, “added ING economists.
Also on the radar are US home sales on Monday and new home sales on Tuesday. Durable goods orders will be launched on Wednesday, along with the manufacturing PMI.
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