(Kitco News) Gold has returned to investors’ radar as prices close the week on a strong technical note, despite another rise in bond yields.
After trading close to the three-week highs, following the correct statement from the Federal Reserve, the gold managed to ignore on Friday, for 10 years, the yield of the US Treasury up to a 14-month high of 1.75%. At the time of writing, April Comex gold futures were trading at $ 1,72.60, up more than 1% from the week before.
The Fed revised its GDP and inflation expectations in 2021 to 6.5% and 2.4%, respectively, but stressed that rates will remain close to zero until 2023. Fed Chairman Jerome Powell went on to say to any increase in prices as transitory, while ignoring rising yields.
On Friday, the Fed threw another curve on the markets, as it refused to extend a temporary exemption as a rule of bank leverage that expires at the end of the month. The rule excludes US Treasuries and central bank deposits from the “additional leverage ratio”, which helped encourage bank lending during the pandemic. In response, yields continued to rise and the stock market sold.
Given this, gold performed well, holding over $ 1,730 an ounce, while stocks and oil fell. Blue Line Futures market strategist Phillip Streible told Kitco News.
“Gold as an asset class has risen on investor lists. The precious metal was irrelevant to many a few weeks ago; there have been several stocks in other markets. But now, it has moved back. Gold is a player again, after what has been sitting for a while, “Streible said.
Some investors are starting to look at gold amid this market volatility, he added.
Gold also traded well against other commodities, including silver and copper, said Charlie Nedoss, LaSalle Futures Group’s chief market strategist.
“The 10-day moving average is starting to rise and I anticipate a close in 20 days for the first time since January 7,” Nedoss said, adding that these are excellent signs for gold.
Geopolitics has also returned to the radar when it comes to gold trading, analysts said. Top US and Chinese officials clashed during the first high-level meeting with Joe Biden’s administration.
“We will … discuss our deep concerns with China’s actions, including in Xinjiang, Hong Kong, Taiwan, cyber attacks on the United States, the economic constraint of our allies,” US Secretary of State Antony Blinken said at the meeting. held in Anchorage, Alaska.
In response, China’s top diplomat, Yang Jiechi, said: “The United States is using its military strength and financial hegemony to fulfill long-armed jurisdiction and suppress other countries. It is abusing so-called national security to obstruct trade. normal trade and to incite some countries to attack China. “
The tensions come just a day after Joe Biden said Russian President Vladimir Putin was a killer during an ABC News interview.
Following the comments, Putin said he last spoke to Biden by telephone at the request of the US president. It is said that more discussions will follow. “I want to offer President Biden to continue our discussion, but on the condition that we do it live, online, without delay,” Putin said.
With the interruption of the COVID-19 pandemic, geopolitical tensions have eased, but if this is about to change, the price of gold could react positively, analysts told Kitco News.
“Because of concerns over trade agreements, US-China talks have not started so well,” Nedoss said.
Geopolitical uncertainty has a golden step, Streible said. “Geopolitics is now central, as are yields and market volatility. If volatility declines, yields will continue to rise. If there is another explosion in the geopolitical sense, there could be some security buying,” he said. .
Price levels to follow
Gold is still in danger of going in both directions, Streible added. “It can easily drop to $ 1,700 if yields continue to rise. But a $ 1,750 increase could rekindle the bulls’ camp.”
The fact that gold did not wash out at $ 1,700 this week is very good, Nedoss said. “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 great for gold,” he remarked.
Fed is talking, Powell-Yellen duo
Next week, there will also be a list of Federal Reserve speakers, including a joint appearance on the Senate Banking Committee by Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen on Wednesday.
“Given the greater evolution of yields on older bonds, it will be interesting to see if this makes them nervous. We will almost certainly hear a narrative that the risk of inflation is overburdened, but in an environment of constrained supply economy facing massive stimulus-induced demand, we certainly believe that inflation will be higher and more sustained than publicly declared Fed “, ING economists declared on Friday.
Next week’s dates
All eyes will be on Q4 US GDP data on Thursday and the PCE price index on Friday.
“The figures on personal income and expenses will have a reversal after the increase in incentive checks of 600 USD in January data. This weakness will not last long, as the latest stimulus payment of $ 1,400 has hit bank accounts in the last week, with figures set in March being even stronger than in January for both revenue and spending, “they added. ING economists.
Also on the radar will be existing home sales in the US on Monday and new home sales on Tuesday. Orders for durable goods will be issued on Wednesday, along with the production of PMI.
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