11 May 2021

Gold Moves to 3-Month High on US Dollar Weakness

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News shaping
the markets today

     

What’s happening: Gold prices settled higher on Monday, notching gains for a fourth straight session.

What happened: Gains for the precious metal were supported by a decline in the US dollar along with some weakness in the equity markets.

Last week’s disappointing jobs report from the US raised hopes of the Federal Reserve keeping interest rates at all-time low levels, supporting the yellow metal.

Why it matters: On Friday, the US Labor Department’s NFP (nonfarm payrolls) report showed lower-than-expected job additions in April, which pushed the greenback to a more than two-month low, making gold less expensive for people trading the yellow metal with other currencies.

The weaker US jobs data surprised investors, who were expecting a sharp recovery in the economy. The news also crushed speculations of the Federal Reserve looking to tighten its monetary policy in the near term.

The Fed has announced plans to maintain interest rates near record lows till the jobless rate narrows, despite a rise in inflation.

Greenback investors remained cautious on Monday, taking the US dollar index, which measures the currency’s performance versus a basket of major rivals, to as low as 90.04 during the session. The index recovered slightly from its weakest level since late February to end the session at 90.21.

The Nasdaq also traded sharply lower on Monday, with some investors looking to rotate out of the tech stocks and moving into more defensive securities, like industrial metals.

June gold gained $6.30, or 0.3%, to close at $1,837.60 an ounce on the NYMEX (New York Mercantile Exchange) on Monday, after recording a 3.6% gain last week. Meanwhile, July silver added 0.05% to settle at $27.49 an ounce.

In other metals, palladium climbed 1.5% to $2,971.39 per ounce on Monday, after rising to a record high last week on supply shortfall concerns. UBS analysts boosted their end-June and end-September projections for palladium to $3,100 per ounce.

What to watch: Markets will keep an eye on upcoming economic reports from the US, including inflation data, which is scheduled for release on Wednesday. US inflation has a meaningful impact on world gold prices.

Rising covid-19 cases remain one of the top concerns for markets, with total global infections exceeding 158.6 million.

The Markets Today

     

European stocks will be in focus today, after closing slightly higher on Monday.

Context: European stocks ended the first day of the week on a slightly higher note, despite tech stocks recording losses on Monday.

Details: The earnings season has entered its final stretch, with around two-thirds of STOXX 600 firms having already reported their Q1 results. Of these, about 74% of companies have exceeding earnings expectations.

Miners led gains on Monday amid market optimism around the reopening of economies. Mining stocks, such as BHP Group, Rio Tinto and Glencore, all recorded gains.

The pan-European Stoxx 600 rose 0.1% to an all-time high of 445.39 on Monday, with shares of basic resources leading the gains by adding 2.2%. However, tech stocks remained under pressure, shedding 1.4% in the previous session.

Germany’s BioNTech announced plans to develop a manufacturing site for its mRNA-based vaccines in Singapore. The biotech company also reported a sharp rise in its quarterly sales, which helped buoy investor sentiment.

The German DAX 30 closed almost flat, while the French 40 edged higher by 0.01%. Meanwhile, London’s FTSE 100 slipped 0.1% on Monday, following a rise in the British pound as investors looked forward to British Prime Minister Boris Johnson announcing the next phase of reopening from the covid-led lockdown.

On the economic data front, UK’s house prices rose to a five-year high in April, sending the Halifax house price index 8.2% higher than the year-ago level.

What to watch: Investors await the ZEW Indicator of Economic Sentiment from the Eurozone, which fell by 7.7 points to 66.3 in April. Economists projected a further declined to a reading of 65 for May.

Other Markets: US indices closed lower on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.10%, 1.04% and 2.63%, respectively on Monday.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s wholesale prices and ZEW indicator of economic sentiment, Turkey's industrial production, retail sales, current account and Central Bank of Turkey’s meeting summary, Italy’s industrial production, America’s NFIB small business optimism index, Redbook index, ISM New York index, number of job openings and API’s crude oil stockpiles, Brazil's consumer price inflation and Brazil's central bank Copom meeting minutes, Mexico’s gross fixed investment, South Africa's manufacturing production, Russia’s foreign exchange reserves as well as China's auto sales, new yuan loans, outstanding yuan loan, total social financing and money supply M2.

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