Tuesday, the second half of the Asian session, spot gold and silver continued to power, near the end of the day, spot gold once above $ 1860 / ounce, up nearly 1% during the day, while spot silver rushed up to $ 25.5 / ounce, up 2.52% during the day.
Then in the European session, spot gold and silver narrowed the gains, and at 21:24, spot gold fell back below $1850/oz.
Before the U.S. session, gold dipped again. 22:07, spot gold fell below $1840/oz, down 0.14%, down more than $20 from the daily high. It should be noted that during the day, the U.S. ten-year Treasury yield rose to 1.177%, the highest level since March last year. The yield spread between the U.S. two-year and 10-year Treasuries widened to 102.4 basis points, the widest since May 2017.
The dollar index was slightly declining in the afternoon, turning down after touching 90.63 on the upside at midday, and had lost 20 points by the end of the Asian session; but then the European session shocked higher and came to the U.S. session before the U.S. index recovered all its losses.
Fundamentally, the epidemic situation is still not optimistic. In Japan, following the declaration of a state of emergency in Tokyo last week, a number of prefectures joined the state of emergency today. British health minister Hancock also warned: we are in the most severe phase of the new crown epidemic and do not rule out further measures if necessary.
However, gold and silver may be more threatened by the dollar and the rise in U.S. bond yields. As of Monday, the dollar rose for the third consecutive session, comparable to the continued climb in U.S. Treasury yields. U.S. Treasuries weakened further across the board, with the 10-year Treasury yield climbing for a sixth straight day, once above 1.15%, and U.S. stock futures also rising.
Naeem Aslam, chief market analyst at AvaTrade, said the steady rise in long-term bond yields, which can compete with gold for safe-haven buying, could eventually sap some of the interest in the precious metal. For his part, Rodrigo Catril, senior foreign exchange strategist at National Australia Bank in Sydney, noted.
“The dollar is consolidating recent gains as markets reassess the tangled situation of a potential additional U.S. fiscal stimulus package and the still-existing U.S. political uncertainty.”
New debt king Gonzales and a growing number of analysts are warning that inflation is picking up, with Seekingalpha analyst Jason Tillberg even arguing that it is likely to spike to 3% in the next few months.
Morgan Stanley also believes inflation will soon spiral out of control. The U.S. 10-year break-even inflation rate, a market indicator of annual inflation expectations, climbed above 2.10% this week for the first time since 2018. It could go even higher amid soaring oil prices. A break in the indicator could prompt traders to bet early on a Fed rate hike, with signs of this already evident in European dollar futures. So be wary of the depressing effect of a rally in the dollar on gold and silver.
In fact, DB has abandoned its bearish forecasts for the dollar in the near term and has also adjusted its positions.
Exiting some short USD positions, such as short USD against EUR and against CAD, it now recommends short GBP/NOK and shifting from short USD/CAD to short CHF/CAD.
This is the first time the team has adjusted its USD strategy since March last year.
On the technical front, analyst James Hyerczyk said the current modest rally in spot gold may indicate that buying is stronger than selling at current price levels, with upside resistance at $1,864.90 and $1,889.80. However, as the main trend is currently down, sellers may enter the market when gold tests the 1889.80 level.
If the gold price turns down and loses the 1817.10 level it would indicate growing selling pressure, or trigger a further move lower to the 1780.50 to 1767.20 level, and a break below 1767.20 would reconfirm gold’s downtrend.
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