As dollar strengthens, the yellow metal weakens

Spot gold was up 0.1 percent at $1,318.52 past week, not far from a low of $1,315.06 hit in the previous session, it’s weakest since March 21.

The metal was on track to finish the week down more than 1 percent for its second consecutive weekly decline and the biggest weekly drop in four.

The strength of the U.S. dollar - combined with the weakness of the euro zone currency after (ECB chief) Mario Draghi’s speech - is pushing down the yellow metal.

The dollar hit a 3-1/2-month high against a basket of currencies on higher U.S. yields while the euro was hampered by a dovish tone from the European Central Bank. On Wednesday the benchmark 10-year Treasury yield reached its highest since January 2014 at 3.035 percent. A rise in U.S. bond yields pressures gold by reducing the attractiveness of non-yielding bullion, which is priced in dollars.

Thursday’s trading started on a weak footing, but most of the metals ended the day in positive territory, which suggested dip buying and support are features of the market. Precious metals prices were little changed on Thursday morning, with gold and silver prices off by 0.1% – with the former at $1,316.54 per oz. Meanwhile, the platinum group metals were both up by 0.1%.

Gold continued losing ground through the early NA session and is currently placed at fresh 6-week lows, around the $1312-11 region.

After Friday's corrective bounce, resurgent US Dollar demand was seen as one of the key factors weighing heavily on dollar-denominated commodities - like gold at the start of a new trading week.  Gold prices retraced upward in what looked like a correction after higher and sent the yellow metal to a one-month low.

Easing geopolitical concerns and the strengthening dollar index are the factors which are creating the sell-off. This rise in the dollar seems to be weighing on gold and is likely to be a headwind for metals’ prices generally.

Recent increases in geopolitical tensions and rising commodity prices, especially oil, seem to have spurred inflationary concerns that have led to stronger bond yields and in turn that has lifted the US dollar, with the dollar index at 90.97. This has broken above the previous peak at 90.94 from March 01.

At their summit on Friday, North Korean leader Kim Jong Un  and South Korean President Moon Jae-in declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the "denuclearisation" of the Korean peninsula.           

North Korean leader Kim Jong Un and South Korean President Moon Jae-in on Friday declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the “denuclearisation” of the Korean peninsula.

The signs of detente in the North Korean conflict are ... contributing to the lack of solid demand for gold as a safe haven at present

Further as tensions o the Korean peninsula eased, the European shares rose after a positive session among Asian stocks overnight. The dollar index rose 0.2 percent on Monday, 30th April, holding just below its strongest since mid-January.

Gold fell at the start of this week, pulling back towards last week's more than one-month low as easing tensions on the Korean peninsula boosted appetite for assets seen as higher risk, such as stocks, and lifted the dollar.
   
The metal slid 1 percent last week on the back of a stronger dollar and a rise in Treasury yields to above 3 percent, which weighed on interest in non-interest bearing assets. On Thursday, it hit its lowest since March 21 at $1,315.06 an ounce.

That has left it on track to end April down 0.5 percent, erasing all the previous month's gains.
Spot gold was down 0.4 percent at $1,316.15 an ounce during trading hours.
   
Meanwhile, the Fed’s favoured PCE inflation gauge is expected to put core price growth at a 13-month high of 1.9 percent.

The latter would put the Fed within a hair of at least ostensibly meeting its dual objectives. Policymakers aim for inflation of 2 percent to be sustained in the medium term – abating the significance of a single month’s reading – but another sign of steady progress may reinforce the case for tightening.

Gold may return to suspicion, if this materializes as the prospect of higher rates sustains the US Dollar, undercutting demand for non-interest-bearing and anti-fiat assets.

   

Has the golden streak ended

Gold was seen under pressure since the middle of last week and has continued this sentiment for the current week now, testing vital support ratios near the 1330.00 U.S Dollars per ounce level. The precious metal stumbled as the Dollar gained in forex against the other major currencies.

Gold prices fell $4.02 an ounce last Thursday, ending a four-day streak of gains, as geopolitical tensions eased and the dollar strengthened on the back of solid U.S. economic data. Gold failed to test the resistance at $1354 and was unable to break through it .As a result, prices broke below $1347.

In economic news, the Labor Department reported that the number of first-time applicants for jobless benefits fell last week for the third time in four weeks and the Federal Reserve Bank of Philadelphia said the index measuring manufacturing activity in the region climbed to 23.2 from 22.3 the prior month.

This strong news supported the US dollar which in turn created a downward pressure on the yellow metal. 

Also pressuring bullion, a U.S. central banker said the Federal Reserve should keep raising interest rates this year and next to keep the economy from overheating and financial stability risks from rising. Higher rates dent the appeal of non-interest yielding bullion while lifting the dollar, in which it is priced

U.S. interest rates futures fell on Friday as traders bet on a greater likelihood the Federal Reserve would raise key short-term borrowing costs three more times in 2018 in the wake of data that showed steady U.S. economic growth.               

Spot gold lost 0.6 percent at $1,336.96 per ounce by and was headed for a weekly decline of nearly 1 percent.

What’s funny is that over the past fortnight the main reason that pushed gold prices high the same reason was responsible for its downward movement last week, thanks to the easing out of geopolitical worries. Investors were less jittery about geopolitical tensions that had supported gold prices earlier in the week, notably Syria and North Korea.

U.S. President Donald Trump said on Sunday the North Korean nuclear crisis was a long way from being resolved, striking a cautious note a day after the North's pledge to end its nuclear tests raised hopes before planned summits with South Korea and the United States.             

Though the geopolitical crisis are still high, but it looks like their severity has declined over past few days and hence gold prices are lying lull.

Gold is often used as safe haven in times of uncertainty and any easing out of such situations will surely pull down gold further.

Gold prices eased on Friday and were on track to end the week lower as the dollar advanced on expectations of higher U.S. interest rates and market players grew a bit less worried about global political and security risks.

This negative sentiment has been forwarded in the current week too. Gold prices slipped to their lowest level in nearly two weeks on Monday as the dollar remained supported on the back of rising U.S. Treasury yields. 
 
Spot gold was down 0.1 percent at $1,333.20 per ounce during Mondays trading hours, after earlier touching its lowest since April 10 at $1,331.70. The dollar index, which measures the greenback against a basket of currencies, was up about 0.1 percent at 90.392.
           
Gold, however, does continue to show important support around 1323.00 U.S Dollars per ounce and if the commodity declines further, traders might look for reversals. But patience will be an important piece of the puzzle for market participants.

The chief investment strategist said that gold is an excellent asset to invest in this year, as it guards against sudden shocks and rising volatility, especially in light of all the trade-war fears rocking the markets. Folts added that his preference is gold-backed ETFs.

Investors have also been picking up on geopolitical risks and buying gold ETFs as security. Bloomberg reported last week that the popularity of gold-backed ETFs was at its highest level since 2013.