The weakness of the US dollar and the decrease in Treasury bond yields helped push the price of gold towards the $1871 resistance at the beginning of Tuesday's trading. Markets are now focusing on inflation levels and the US Federal Reserve's reaction to them. The release of the contents of the minutes of the last US Federal Reserve meeting on Wednesday may have an opportunity to get some clues about the bank's reaction. Gold's recent gains have trimmed its losses since the beginning of the year 2021 to date to less than 3%.
Silver, the sister commodity to gold, also increased its gains with the beginning of this week's trading. As silver futures rose to $27.685. Therefore, silver recorded weekly gains of about 1% last week, which increased its rise in 2021 to beyond 4%.
The US Dollar Index (DXY) fell to 90.31, and the DXY Index, which measures the performance of the US dollar against a basket of six major rival currencies over the past month, fell by about 1%, although it did not achieve a weekly gain of 0.1%. A lower dollar is beneficial for the commodities quoted in it because it makes them cheaper for foreign investors to purchase. On the other hand, we noticed a variation in the performance of the bond market. The benchmark 10-year Treasury note yield rose to 1.645%. One-year yields fell 0.002% to 0.046%, while 30-year yields jumped 0.008% to 2.364%. The weaker bond market is beneficial for bullion that does not yield returns because it lowers the opportunity cost.
In general, inflation is likely to be one of the main factors in gold prices moving forward. Last week, the annual US inflation rate rose to 4.2% in April, while producer prices rose by 6.2%. At the same time, higher inflation could push the Fed to raise interest rates, which are usually bearish in relation to gold prices.
In recent weeks, inflows have spiked into gold-dominated exchange-traded funds (ETFs), so this may support expectations that demand for gold may be renewed in the coming weeks. As for the other metals markets, copper futures rose to $4.665 a pound. Platinum futures rose to $1237.00 an ounce. Palladium futures fell to $2885.00 an ounce.
Technical analysis of gold:
On the daily chart, the price of gold is still moving strongly within its ascending channel, and its recent gains raise questions about the opportunity to move towards the next psychologically important high at $1900. This may happen if the bulls succeeded in breaking through the resistance level of $1885. It must be taken into account that the recent gold gains moved the technical indicators to strong overbought levels, so profit-taking may happen at any time, especially if gold does not get more momentum. On the downside, the first reversal of the current trend will not occur without breaching the $1810 suppport and then $1785. Otherwise, the general trend for gold will remain bullish.
The price of gold will be affected today by the strength of the US dollar and the extent of investor risk appetite, in addition to the announcement of the growth of Japan’s economy and the numbers of jobs and wages in Britain. Then, the rate of growth of the Eurozone economy and the US housing numbers will be announced.
