Gold rose to the highest in more than three months as concerns over the pace of a global recovery crept back in following a flareup in coronavirus cases in parts of Asia.
The pandemic is wiping out “entire families” in villages in India, where more people are saying the scale of the crisis is much bigger than official numbers reveal. The World Economic Forum is canceling the annual meeting it was planning to hold this August in Singapore, while cases in Thailand have surged.
Investors will turn to the minutes from the Federal Reserve’s April meeting due Wednesday for potential clues to officials’ views on the recovery and how they define “transitory” when it comes to inflation. Fed Vice Chair Richard Clarida said Monday that the weaker-than-expected U.S. jobs report for April showed the economy had not yet reached the threshold to warrant scaling back the central bank’s massive bond purchases. Meanwhile, Fed Bank of Dallas President Robert Kaplan said supply and demand imbalances and base effects will contribute to elevated inflation this year, but he expects price pressures to ease in 2022.
Gold’s rebound puts it close to erasing this year’s declines, with recent inflows into bullion-backed exchange-traded funds signaling a boost to investor sentiment. Expectations for further increases in consumer prices could start to bolster demand for gold as a hedge.
“It seems inflation fears are finally translating into higher precious metals prices,” said John Feeney, business development manager at Sydney-based bullion dealer Guardian Gold Australia. “ETF investors are starting to swing into net-buyers again, after the recent consolidation, and it makes sense for the metals to play catch up to the recent moves higher in other commodities. We also have a lot of uncertainty with Covid-19 strains and mutations in the Asia-Pacific region that would be leading to safe haven buying.”
Spot gold rose as much as 0.4% to $1,873.82 an ounce, the highest since Jan. 29, and was at $1,868.01 by 12:16 p.m. in Singapore. Silver and palladium gained, while platinum steadied. The Bloomberg Dollar Spot Index fell 0.1%.
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.
Gold Slips as Wall Street Gains Sour Appeal
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 Hits Eight-Month Low as Global Optimism Grows Amid Rising Demand for Bitcoin
Gold Struggles Ahead of Economic Recovery as Bitcoin, New Gold, Surges
Global haven asset, gold, declined to the lowest in more than eight months on Tuesday as signs of global economic recovery became glaring with rising bond yields.
The price of the precious metal declined to $1,718 per ounce during London trading on Thursday, down from $2,072 it traded in August as more investors continue to cut down on their holdings of the metal.
The previous metal usually performs poorly with rising yields on other assets like bonds, especially given the fact that gold does not provide streams of interest payments. Investors have been jumping on US bonds ahead of President Joe Biden’s $1.9 trillion coronavirus stimulus package, expected to stoke stronger US price growth.
“We see the rising bond yields as a sign of economic optimism, which has also prompted gold investors to sell some of their positions,” said Carsten Menke of Julius Baer.
Another analyst from Commerzbank, Carsten Fritsch, said that “gold’s reputation appears to have been tarnished considerably by the heavy losses of recent weeks, as evidenced by the ongoing outflows from gold ETFs”.
Experts at Investors King believed the growing demand for Bitcoin, now called the new gold, and other cryptocurrencies in recent months by institutional investors is hurting gold attractiveness.
In a recent report, analysts at Citigroup have started projecting mainstream acceptance for the unregulated dominant cryptocurrency, Bitcoin.
The price of Bitcoin has rallied by 60 percent to $52,000 this year alone. While Ethereum has risen by over 660 percent in 2021.
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