Yesterday’s trading ended with losses for precious metals, although at the beginning of the day the yellow asset was moving towards the key $ 1,800 threshold very confidently. The most actively traded gold futures peaked at $ 1,796, which is a 9-week high.
However, the main precious metal failed to support the upward impulse. Following the session on the New York Stock Exchange Comex, June gold futures fell by 0.29%, or $ 4.20, stopping at $ 1,777.80 per troy ounce. The May silver contract also closed down, sipping 0.50%, or 11 cents. Its price was $ 26.08.
Thus, precious metals extended their decline observed on Thursday. The cumulative losses for the week for both gold and silver amounted to 0.1%, according to data from the FactSet resource.
Gold bars shrugged off Friday’s news that US President Joe Biden is planning to nearly double the capital gains tax for wealthy people, which has brought down the American stock market. Yesterday, the greatest pressure on the asset’s pricing was exerted by the strengthening of the dollar and the rise in the yield of US government bonds.
On Friday, 10-year bonds demonstrated positive dynamics for the first time in 4 days. The catalyst for them was the release of statistics on new home sales in the United States. Last month, the figure increased more than 20%, hitting a mark well above the forecast of 1.021 million. This is the fastest pace of new home sales since 2006, so hopes for an economic recovery are growing.
Gold prices, however, managed to find some support this week ahead of Friday’s decline. Investors were looking at COVID-19 hotspots on the world map and their potential to disrupt the global economic recovery after the pandemic. Mainly, the yellow precious metal was fueled by news of coronavirus outbreaks in India and Japan. Nevertheless, the tense epidemiological situation in the world did not help the asset push off harder and jump to $ 1,800.
“Further upward movement may be facilitated by a trend reversal in the flows of gold exchange-traded funds, the signs of which are already being observed,” says Karsten Fritsch, an analyst at Commerzbank. – The average daily outflow of precious metal in April was 1.5 tons, compared with almost 6 tons in March. In the second half of the year, we expect more gold ETF inflows. In this case, the price can rise and return to the level of $ 2 thousand.
The expert predicts that conditions for gold will improve this year, as “the US Federal Reserve will continue to adhere to its soft monetary policy for a long time to come.” According to Fritsch, against this background, in the second half of the year, the yield on US government bonds and the dollar rate should decline, which will turn the headwind for the precious metal into a tailwind.
“I am confident that gold will strengthen as fears about inflation among investors intensify,” said Brian Lundin, editor of the Gold Newsletter. – Now inflationary expectations are the highest in recent years. Seeing their further dynamics, more and more investors will start looking for protection from the safe-haven asset.
Analysts remain optimistic about the near-term gold price direction, thanks in large part to the recent drop in bitcoin. The popular cryptocurrency is headed for its worst week in almost 2 months. At the time of writing, BTC was trading at $ 50,405, down more than 5% over the day.
LaSalle Futures Group market strategist Charlie Nedoss believes that renewed negative volatility in Bitcoin could be beneficial for gold, which is still losing the battle for digital coin popularity:
– If bitcoin remains at the bottom over the next week, this will significantly increase the investment attractiveness of the precious metal and give it another impetus. However, in order for the asset to be able to break through the level of $ 1,800, one more important condition is required – the dollar index must reach new lows, dropping below 90.
According to Daniel Pavilonis, commodity broker RJO Futures, if the key mark is exceeded, the main precious metal will be able to move much more confidently and faster towards its next target of $ 1,900. Fewer resistance levels will contribute to this.
Analysts emphasize that at the $ 1,800 mark, gold is meeting very strong resistance, which the bulls will have to contend with. New macroeconomic statistics will pose a potential threat to the growth of the metal next week. Even short-term reactions to positive data will not be good for gold.