Gold futures ended lower on Friday, reaching the previous session as a two-week high, while some investors discussed gains before the week and on the strength of the US dollar against a basket of major currencies.
Losses may have been limited by the hope that the Biden administration could come up with fresh stimulus, although there may be problems with the timing of coronavirus relief and package size.
On Friday, April, Comex gold rose to $ 1856.20, up $ 13.10 or -0.70%.
Better-than-expected economic data in the US may have also limited profits, as it points to an improving economy, although unemployed data on Thursday indicated that a weakening labor market could still hurt the economy.
Gold traders are also looking at increasing cases of coronavirus in China and the Eurozone. China can push the world economy alone, which will increase the need for more fiscal and monetary stimulus worldwide. The Eurozone is probably heading for another recession that could weigh on the Euro, which will boost the US Dollar Index.
The biggest influence on gold will be the yield of the treasury
Ten-year treasury yields fell on Friday morning as President Joe Biden’s proposed $ 1.9 billion stimulus package pitted the opposition in Congress just a week after announcing the plan.
The yield on the 10-year treasury note fell to 1,086%, while the yield on the 30-year treasury bond 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 lightening test against Americans.
Here’s the tricky part that can confuse gold traders.
If Biden’s gets a $ 1.9 billion stimulus package, in other words, whatever he asks for, inflation could rise. If inflation rises, Treasury yields will move higher to support the US dollar. A stronger dollar will then lower the foreign demand for gold money in dollars.
If the Biden plan struggles in Congress and a smaller package is adopted, stocks could retreat, meaning demand for risky assets will fall. It will also send investors into the safety of the US dollar, and again, gold prices could be curtailed.
Short-term outlook
At present, there is no clear catalyst for gold, so a rally can hardly struggle. The long-term principles are strong enough to provide support, but a runaway rally like the one we had from April to August last year is currently not on the cards.
Check out our economic calendar for all the economic events of today.