Since the beginning of 2021, gold has witnessed a 5 % drop till date. It has been a rough path for gold as investors rotate out of the safe haven trade into riskier assets said Prithviraj Kothari of RSBL. The gold market continues to struggle as investors focus on the potential for tighter monetary policy and transitory higher inflation pressures.
The gold markets have been challenging to trade recently due to a stronger dollar. It was the strong USD that was clipping gold’s wings. But before that, the USD index slipped fin 93.2 to 92.7 and 10y gained firm 1.15% to 1.29% amid US economic growth, uncertainty on Delta variant and inflation. Benchmark U.S. Treasury yields continued their bounce from five-month lows, further pressuring the bullion
Gold was subdued in volatile trade on Tuesday as the dollar strengthened, curbing inflows into the safe-haven metal despite some concerns over a surge in COVID-19 cases.
Gold prices hit a one-week low on Wednesday, though they’re up almost 2% in July. Gold price is pressurizing the lows, flirting with $1800 amid a renewed risk-on wave that has gripped the Asian market, as traders shrug off COVID worries for now.
Gold prices saw a decline in Asia on Thursday morning, which was a close reminder of the week low prices. The strengthening of dollar affected the prices of the yellow metal as risk appetite increased with concern over the rising COVID 19 cases erased by the effective vaccination program.
Gold prices extended slide to their lowest in nearly two weeks on Thursday on the back of a rebound in stocks and firmer U.S. dollar, while investors looked to the European Central Bank for their stance on policy.
Spot gold fell 0.5% to $1,794.58 per ounce during Thursdays trading hours.
On the other hand, Dow regained the entire losses of Monday’s crash. Asian markets were seen rejoicing this recovery and India followed suit. Amid all the chaos and uncertainty, the focus will now shift to the upcoming FED meeting to be held this Wednesday… Powell’s new views on Wednesday will be of paramount importance, unlikely to do a tapering and boost for gold. As mentioned the heightened inflation and feared to be signs of stagflation, is a booster for gold since no one will focus on Dow then. So $1792-$1795 is still an immediate support from where there should be a recovery to $1810-$1815 possible while protective stop is at $1787-$1785.
But rising inflation could be setting gold up for a rebound. We actually do see inflation tick up here; you can expect that gold will kick in opined the bullion king of India.
A surge in coronavirus cases in the United States and other countries however spurred some safe-haven buying of bullion in recent sessions, with gold rebounding as much as 1.7% from Monday’s one-week low.
A lot of people in the gold market have taken their eyes off the ball this year, but if we get more bad news on the COVID front and equities weaken, you could get just that flight- to-safety buy in a market that can wake up pretty quick. RSBL analysts were of the opinion that world economies were moving towards recovery, trillions of dollars in U.S. fiscal spending, and the increasing demand for many metals as part of the global energy transition, should support commodities in the longer term, contributing to higher inflation expectations. In addition, ongoing monetary stimulus, alongside expected fiscal stimulus, adds conviction to the “here-for-longer” inflation case. While there are plenty of long-term fundamental factors that support gold prices, dollar and inflation continue to remain the most influential ones.