Gold slipped 1% on Monday, with a dip in the dollar and U.S. Treasury yields offering little respite as U.S. equities gained, which dulled bullion’s appeal.
Spot gold was down 0.3% at $1,738.93 per ounce. U.S. gold futures settled 0.2% down at $1,738.1.
“Gold should be higher yet it’s not. That really speaks to a weak market if normal correlations (like a weaker dollar) are not holding up,” said David Madden, analyst at CMC Markets UK, adding gold could slip further if the dollar and yields advance.
Gold fell as much as 1% during the session as investors flocked to the dollar and government bonds, spooked by Turkey’s decision to replace its central bank head with a critic of high interest rates.
“If (Turkish) citizens are concerned that the lira is weak, they’d look to buy U.S. dollars or gold, but this is where the fear comes – that capital controls will stop money coming into the country …it could be tricky for people to get their hands on dollars, and in turn gold, in the next few weeks,” CMC’s Madden said.
Gains on Wall Street also pressured gold.
“Traders want to see gold above $1,750 and hold there before you start to see new money coming into this trade,” said Bob Haberkorn, senior market strategist, RJO Futures, adding the U.S Federal Reserve’s low-interest rate policy could boost prices by year-end.
Elsewhere, palladium dropped 1.1% to $2,606.24 per ounce and platinum shed 1.1% to $1,182.87. Russia’s Nornickel, a major palladium producer, shut a metallurgical processing facility in Russia’s border region with Norway and Finland to curb emissions.
The issues at Nornickel could “push the palladium market into a wider deficit this year which, combined with strong demand from tightening emissions standards, could keep prices elevated,” Heraeus Precious Metals said in a note.
Gold Gained on Thursday as COVID-19 Variant Spreads
Gold, the world’s number one safe-haven asset, rose by 0.3 percent to $1,774.39 per ounce on Thursday amid rising concerns over the spread of the Delta coronavirus variant.
The precious metal moved further away from a two-month low hit on Tuesday, gold might have called the bottom for the bearish trend started when the U.S Fed announced possible rates increase in 2023.
Rising cases of the Delta variant have prompted France to delay the easing of restrictions in the Landes region, while infections have also surged in Asia.
If the rise of the variant forces authorities to introduce new lockdowns, especially in Europe and the United States, then we may be looking at the risk-averse safe haven trade offering support to gold, Ricardo Evangelista, a senior analyst at ActivTrades.
Also on investors radar is Friday’s U.S. nonfarm payrolls that could provide more clues on timeline for Fed’s shift in monetary policy. The weekly jobless claims data is due later on Thursday.
Global Demand for Investment Gold Plunged by 70% YoY to 161 Metric Tons in Q1 2021
Last year, investors flocked to gold as stock markets crashed on a gloomy economic outlook due to the spread of the COVID-19 pandemic. In the second quarter of 2020, global demand for investment gold surged to over 591 metric tons, the second-highest level since 2016. However, the investors’ demand for gold has dropped significantly this year.
According to data compiled by AksjeBloggen, global demand for investment gold plunged by 70% year-over-year to 161 metric tons in the first quarter of 2021.
The Lowest Quarterly Figures after Record Gold Investments in 2020
In 2016, the global gold demand amounted to 4,309 metric tons, revealed Statista and the World Gold Council data. By the end of 2019, this figure rose to 4,356 metric tons. Investment gold accounted for 30% of that amount. Worldwide gold jewelry demand volumes reached 2,118 metric tons that year. Central banks and technology followed with 648 and 326 metric tons, respectively.
Statistics show the global demand for investment gold surged amid the COVID-19 outbreak, growing by 35% YoY to almost 1,800 metric tons in 2020. Demands for gold used in technology also rose by 17% to 383.4 metric tons, while central banks and other institutions bought 326.2 metric tons of gold in 2020, a 50% plunge in a year.
However, after record gold investments in 2020, the global demand for gold for investment purposes dropped to the lowest quarterly level in years.
The Price of Gold Dropped by 5% Since January
The average gold value tends to increase during a recession, making it an attractive investment in uncertain times. In February 2019, a troy ounce of gold cost $1,320.07, revealed the Statista and World Gold Council data. By the end of that year, the price of gold rose to $1,479.13.
The gold price continued growing throughout 2020, reaching an all-time high of over $2,000 in August. By the end of the year, the precious metal price slipped to $1,864 and then rose to over $1,950 in January 2021.
However, the first quarter of the year brought a negative trend, with the price of gold falling to $1,684 by the end of March. Statistics indicate the price of gold stood at around $1,860 last week, a 5% drop since the beginning of the year.
Gold, Other Safe Haven Assets Plunge Ahead of Fed Rate Hikes
Gold and other safe-haven assets plunged last week as the Federal Reserve signals the possibility of raising interest rates twice in 2023 given the ongoing economic recovery post-COVID-19.
The price of gold dropped by 6.04 percent last week as investors rushed to move their funds out of safe-haven assets including the new gold, cryptocurrency.
The entire crypto space sheds $898 billion in market value to hover around $1.625 trillion last week, down from $2.523 trillion recorded on Wednesday 12, 2021. Its highest market capitalisation till date.
The Federal Reserve raised inflation expectations to 3.4 percent and shifted the year it is expected to increase interest rates from near-zero to 2023 from the previously projected 2024.
The new hawkish stance of the central bank led to capital outflow from safe havens and subsequently boosted dollar attraction.
The United States Dollar gained across the board with the dollar index that tracks its performance against six major currencies, rising by 0.63 percent to 91.103 last week.
However, on Monday morning the gold showed signs of recovery, gaining 0.5 percent to $1,772.34 per ounce following the retreat in U.S. treasury yield that boosted the attraction of non-yielding metal.
Bitcoin, the most dominant cryptocurrency coin, pared losses to $33,245 per coin, up from the $32,658 decline it posted last week.
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