(Kitco News) Gold is back on investors’ radar as prices appear to end the week on a strong technical note, despite another spike in bond yields.
After trading near a three-week high following the Federal Reserve’s moderate statement, gold managed to ignore the 10-year U.S. Treasury yield that hit a 14-month high of 1.75% on Friday. rose. At the time of writing, April Comex’s gold futures were trading at $ 1,742.60, up more than 1% in the same week.
The Fed has raised its GDP and inflation expectations for 2021 to 6.5% and 2.4%, respectively, but stressed that interest rates would remain close to zero until 2023. Fed Chairman Jerome Powell continued to view price spikes as temporary, but ignored rising interest rates.
On Friday, the Fed threw another curveball at the markets as it refused to extend a temporary bank leverage exemption that expires at the end of the month. The rule excluded US Treasury bonds and central bank deposits from the “additional leverage ratio”, which boosted bank lending during the pandemic. In response, yields continued to rise and the stock market was sold.
In light of this, gold performed well, worth over $ 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 has risen on the investor lists. The precious metal was irrelevant a few weeks ago; there was more action in other markets. But now it is moving itself back up. Gold is a player on the field again after a while in the bank. have stood, ” said Streible.
Some investors are starting to look to gold amid this market volatility, he added.
Gold also traded well against other commodities, including silver and copper, said Charlie Nedoss, senior market strategist for the LaSalle Futures Group.
“The 10-day moving average is starting to rise and I expect a close above 20 days for the first time since January 7,” Nedoss said, adding that these are great signs for gold.
Geopolitics are also back on the radar when it comes to gold trading, analysts said. Top US and China officials clashed during the first high-level meeting with Joe Biden’s government.
“We will … discuss our deep concerns with actions by China, including in Xinjiang, Hong Kong, Taiwan, cyber attacks on the United States, economic coercion from our allies,” US Secretary of State Antony Blinken said at the meeting. , which took place in Anchorage, Alaska.
In response, China’s top diplomat Yang Jiechi said, “The United States is using its military power and financial hegemony to exercise long-armed jurisdiction and oppress other countries. They are misusing so-called notions of national security to hinder normal trade exchanges and some countries to overcome China. to attack. “
These tensions come just a day after Joe Biden said during an interview with ABC News that Russian President Vladimir Putin was a murderer.
In response to the comments, Putin said he last spoke to Biden by phone at the request of the US president. More conversations are reported to follow. “I want to offer President Biden that we continue our discussion, but on the condition that we do it live, online, without any delay,” Putin said.
With COVID-19’s pandemic disruptions on hold, geopolitical tensions have been low, but if that is about to change, gold prices could react positively, analysts told Kitco News.
“With concerns about the trade deal, talks between the US and China did not start very well,” Nedoss said.
Geopolitical uncertainty has turned some gold, Streible said. “Geopolitics are now at the forefront, as are returns and market volatility. If volatility diminishes, returns are likely to stay higher. If there is another geopolitical flare-up, some security can be bought,” he said. .
Price levels to watch
Gold is still at risk of going both ways, Streible added. “It could drop to USD 1,700 quite easily if yields continue to rise. But a push by USD 1,750 could rekindle the bull camp.”
The fact that gold didn’t get away with $ 1,700 this week is very good, Nedoss said. “On the other hand, I don’t want to see a close above yesterday’s lows below USD 1,720. If we can close above USD 1,750 an ounce, it would be big for gold,” he noted.
Fed speaks, Powell-Yellen duo
There will also be a series of Federal Reserve speakers next week, including a joint appearance before the Senate Banking Committee of Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen on Wednesday.
“Given the rise in long-term bond yields, it will be interesting to see if that makes them nervous. We will almost certainly hear a story that inflation risks are exaggerated, but in an environment of a supply-constrained economy experiencing massive stimulus measures. induced demand, we certainly think inflation will be higher and more sustainable than the Fed has publicly stated, “ING economists said Friday.
Data from next week
All eyes will be on Thursday’s fourth quarter US GDP data and Friday’s PCE price index.
The personal income and expenditure figures will see a reversal after the $ 600 stimulus control boost in January data. This weakness won’t last as the last $ 1,400 stimulus payment hit bank accounts in the past week with the numbers March. to be even stronger than January for both income and expenses, “ING economists added.
Also on the radar will be sales of existing homes in the US on Monday and new home sales on Tuesday. Durable goods orders come out Wednesday, along with manufacturing PMI.
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