Gold Prices Under Pressure
Abhishek Bansal | Mar 23, 2021 05:19AM ET
The Fed comment that played down inflation risks and ignores the recent rise in US bond yields has put gold prices under pressure.
Richmond Fed President Barkin said the US economy is set for a strong 2021 that will push up prices, but that there is no sign yet that this will deliver inflation.
Also, ECB Governing Council member Knot said that the ECB could reduce the pace of bond-buying this summer if the economy proceeds as expected. He also said the ECB might be able to start discussions on how to unwind stimulus later this year if countries make sufficient progress on Covid vaccinations. Both comments were negative for gold prices.
However gold prices found support from a new level of covid spread in European countries and negative global economic data. Germany on Monday extended its Covid lockdowns for a month through Apr. 18 as it struggles to contain the pandemic.
The US Feb Chicago Fed national activity index unexpectedly fell -1.84 to a 10-month low of -1.09, against expectations for an increase to 0.72. Also, Feb existing home sales fell -6.6% to a 6-month low of 6.22 million, against expectations of 6.49 million.
Additionally, gold prices found some support after bond yields retrace back some gains. The 10-year US T-note yield dropped by -3.7 bp to 1.684% on Monday, which is moderately below last Thursday's 13-month high of 1.753%.
According to the CFTC Commitments of Traders report for the week ended Mar.16, net long for gold futures increased by 5033 contracts to180196 for the week. Speculative long position increased by 1398 contracts, while shorts were down 3635 contracts.
Gold prices are likely to face stiff resistance near $1757 and $1768 while it may find a strong support base around $1716 and $1684.
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