(Kitco News) Gold is back on investors’ radar as prices look at a strong technical point this week, despite another rise in yields.
After the Federal Reserve traded a three-week high, gold managed to ignore the US Treasury yield of ten years, which rose to its 14-month high of 1.75% on Friday. At the time of writing, April gold futures were trading at $ 1,742.60, up more than 1% over the week.
The Fed raised GDP and inflation expectations from 2021 to 6.5% and 2.4% respectively, but stressed that rates will remain virtually zero until 2023. Fed Chairman Jerome Powell went on to call the price rises “short-lived” while ignoring rising yields.
On Friday, the Fed threw another curve to the markets as it refused to extend a temporary release of the bank leverage rule that expires at the end of the month. The rule excluded US treasury and deposits in the central bank from the ‘supplementary leverage ratio’, which helped encourage bank lending during the pandemic. In response, returns continued to rise, and the stock market sold.
In light of this, gold performed reasonably well, at more than $ 1,730 per ounce, while equities and oil were lower. Blue Line Futures chief 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 was more action in other markets. But it has increased itself again. Gold is a player in the field again after a for a while’s bank, “Streible said.
Some investors are starting to look at gold amid this volatility in the market, he added.
Gold also traded well with other commodities, including silver and copper, said LaSalle Futures Group senior market strategist Charlie Nedoss.
“The ten-day moving average is starting to rise, and I expect it to be higher than the 20 days for the first time since January 7,” Nedoss said, adding that these are good signs for gold.
Analysts have also pointed out that geopolitics is back on the radar when it comes to gold. Top US and China officials clashed with Joe Biden’s government during the first meeting.
“We will … discuss our deep concerns about China’s actions, including in Xinjiang, Hong Kong, Taiwan, cyberattacks on the United States, economic coercion of our allies,” US Secretary of State Antony Blinken said during the meeting said to have taken place in Anchorage, Alaska.
In response, Yang Jiechi, China’s top diplomat, said: “The United States uses its military power and financial hegemony to exercise long-arm jurisdiction and oppress other countries. It abuses so-called national security notions to impede normal trade exchanges. and urge some countries to attack China. ‘
This tension comes just a day after Joe Biden said Russian President Vladimir Putin was a murderer during an ABC News interview.
Following the comments, Putin said he last spoke to Biden on the phone at the request of the US president. More talks are said to follow. “I want to offer President Biden that we will continue our discussion, but on condition that we do so online, without any delay,” Putin said.
With the COVID-19 disruptions of the pandemic, geopolitical tensions have become low, but if it is about to change, the gold price could react positively, analysts told Kitco News.
“Regarding the trade agreement, the US-China talks did not start so well,” Nedoss said.
The geopolitical uncertainty has begun to increase to some extent in gold, Streible said. “Geopolitics is now the front and center, as well as yields and volatility in the market. If volatility falls, yields are likely to go up. If there is another flare-up in the geopolitical sense, there may be some security buying be, “he said. .
Price levels to look at
Gold still runs the risk of going in any direction, Streible added. “It can drop quite easily by $ 1,700 if yields continue to rise. But a push of $ 1,750 could rekindle the bull camp.”
The fact that gold did not erase at $ 1,700 this week is very good, Nedoss said. “On the downside, I do not want to see a close above yesterday’s lows below $ 1,720. If we can close more than $ 1,750 per ounce, it will be big for gold,” he noted.
Fed talk, Powell-Yellen duo
Next week, there will also be a statement from Federal Reserve speakers, who will give a joint appearance to the Senate Banking Committee on Wednesday from Fed Chairman Jerome Powell and Finance Minister Janet Yellen.
“Given the higher increase in yields of longer bonds, it will be interesting to see if that makes them nervous. Almost certainly we will hear a story that inflation risks are exceeded, but in an environment with limited supply “economy that is a big demand caused by stimulus, we think inflation will be higher and more sustainable than the Fed has publicly declared,” ING economists said on Friday.
Next week’s details
The GDP data in the US quarter will be Thursday and the PCE price index on Friday in all respects.
“Personal income and spending figures will see a reversal after the boost of the $ 600 stimulus tests in the January data. This weakness will not last long as the latest $ 1400 stimulus payment hit bank accounts last week with the figures from March to be even stronger than January for both revenue and spending, ”the ING economists added.
The US home sales on Monday will also be on the radar and Tuesday new home sales. Orders for durable goods appear Wednesday, along with manufacturing PMI.
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