Gold has declined by around 5% over the last few months, despite expectations of inflation rising to their highest since 2008. Gold prices pulled back on Friday as robust U.S. bond yields and a strong dollar weighed on the metal, but bullion was on course for its biggest weekly gain in four weeks.
Benchmark U.S. Treasury yields climbed, increasing the opportunity cost of holding gold, while the dollar bounced back from a near one-week low. President Joe Biden on Thursday signed his $1.9 trillion stimulus bill into law and said he was working to speed COVID-19 vaccinations and move the country closer to normality by July 4.
Now that President Biden’s latest stimulus package (a cool $1.9 trillion) has been approved, inflation worries are on the rise. With the money supply enormously increasing and the oil price mounting, it’s pointing to an inflationary situation. While financial markets don’t like inflation, safe-haven assets such as gold tend to prosper.
Bullion king of India, Prithviraj Kothari opines that, the Americans have welcomed the stimulus program, but as we know any such package always creates government debt. This is a long-term problem that’s only getting worse but it’s also rapidly devaluing the dollar.
The arrival of the vaccine and its widespread inoculation has built up hope that normality will return soon though it will come at a cost. The stimulus package will ensure direct checks to public, however it is the massive provision for employment that it offers that people are most looking forward to. It also includes a financial injection into state and local governments along with schools. This is all meant to help get the economy reopened and life back on track.
Investors are now awaiting the U.S. Federal Reserve meeting next week for direction on its monetary policy. Meanwhile, once can consider to buy April gold future at dips of $1703 and average at $1969 target $1723 and $1738 extension $1746.