Gold prices bounce from lowest close since December as dollar slips


Gold futures moved higher Tuesday, clawing back from losses last week that drove the precious metal to its lowest settlement in seven weeks.

The move up for bullion comes against the backdrop of a softer U.S. dollar and as the market digested prepared testimony from Janet Yellen, President-elect Joe Biden’s pick to run the Treasury Department, to the Senate Finance Committee Tuesday.

In the testimony, Yellen said that “with interest rates at historic lows, the smartest thing we can do is act big.” The benefits will “far outweigh the costs, especially if we care about helping people who have been struggling for a very long time.”

She also said that “without further action, we risk a longer, more painful recession now — and long-term scarring of the economy later.”

In a note ahead of Yellen’s comments, Edward Moya, senior market analyst at Oanda, had said that much of Yellen’s expected “dovishness is priced in.”

Even so, her comments “could still serve as a bullish springboard for gold as investors prepare for another wave of ultra-easiness now that the [Federal Reserve] and Treasury will have improved coordination,” said Moya. “Permanent economic scarring to the economy will keep fiscal stimulus coming for the next couple years even as the U.S. economy is clearly on the other side of Covid,” he said. 

“If gold could see steady inflows as virus restrictions tighten across the globe and eventually trade between the $1,850 and $1,900 trading range,” Moya added.

February gold
GC00,
+0.37%

GCH21,
+0.27%

climbed $5.50, or 0.3%, to trade at $1,835.40 an ounce, after a 1.2% decline on Friday helped to drive gold to its lowest finish since Dec. 1 and weekly slide of 0.3%.

Yellen’s remarks come after Biden, last week, rolled out a coronavirus relief plan with a price tag of $1.9 trillion, a sweeping measure that includes cash payments to Americans and money for distributing Covid-19 vaccines.

Gold prices in the longer term are expected to rise amid greater government spending and a weakening buck.

Meanwhile, weakness in the currency helped to boost prices for dollar-denominated gold prices. The greenback, as measured by the ICE U.S. Dollar Index DXY, was down 0.2% at 90.553 early Tuesday.

“Gold may be getting some help from a weaker dollar today, but long-term Treasury yields are going up for the same reason the dollar is going down,” said Michael Armbruster, managing partner at Altavest. In the near-term, rising Treasury yields are negative for gold so we remain negative on gold prices despite a falling dollar.” 

“We think we will get a better buying opportunity for gold somewhere below $1,800 in the near future,” said Armbruster.

Elsewhere in metals, silver for March delivery
SIH21,
+1.42%

SI00,
+1.42%

 rose 26.4 cents, or 1.1%, to $25.13 an ounce, after a 0.9% fall last week.

March copper
HGH21,
+0.92%

tacked on 0.8% to $3.6295 a pound. April platinum
PLJ21,
-0.31%
,
however, shed 0.3%, to $1,087.10 an ounce, while March palladium
PAH21,
-0.80%

lost 0.9% to $2,373 an ounce.



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