04 May 2021

Gold Notches First Rise in Five Sessions

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News shaping
the markets today

     

What’s happening: Gold prices gained more than 1% on Monday, buoyed by a decline in the US dollar and Treasury yields.

What happened: Gold had been under pressure amid an improving outlook for the global economy.

The safe-haven metal found support on Monday from a decline in the greenback and economic data showing the US manufacturing sector expanding at a slower pace last month. The rally in gold prices helped other precious metals record gains.

Why it matters: The US dollar index, which measures the currency’s performance versus a basket of six major rivals, traded lower on Monday, while the benchmark US 10-year Treasury yield also pulled back after climbing to its strongest level in a fortnight last week. The decline in bond yields lowers the opportunity cost of holding the non-interest paying safe-haven yellow metal.

Investor sentiment was also hurt by the ISM report showing a decline in US manufacturing PMI to 60.7 in April, from 64.7 in March. The figure, which missed the market expectation of 65, followed weak growth rates for both new orders and employment.

Rising concerns over covid-19 infections also pushed gold prices higher on Monday. The average daily rate of new global infections remaining above 800,000 for over a week mainly due to India recording more than 300,000 new cases for the twelfth consecutive day.

Gold trading in the Asian session remained low with holidays in China and Japan. The yellow metal added gains during the US session.

Gold futures for June delivery gained $24.10, or 1.4%, to close at $1,791.80 an ounce on the NYMEX (New York Mercantile Exchange) on Monday. This was the first higher close in the last five sessions.

Meanwhile, silver jumped $1.09 to settle at $26.96 per ounce, after hitting its highest level since March 1 during the trading day.

What to watch: Traders await a basket of economic reports this week, including the all-important US non-farm payrolls, which tends to have a significant impact on gold prices. The US Federal Reserve last week reiterated plans to maintain its monetary policy, while acknowledging an improvement in the country’s economic outlook and higher inflation rates.

Gold prices could come under some pressure today following a rise in the US dollar.

The Markets Today

     

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

Context: European stocks traded higher on Monday after the EC (European Commission) announced plans to ease some covid-19 restrictions on travel.

Details: Europe’s STOXX 600 had closed last month with a 1.8% gain, slightly below its record-high level following an acceleration in the covid-19 vaccination drive in the region.

Travel and leisure stocks moved higher on Monday after the EC outlined plans to allow more foreign travellers to enter the common bloc, which could provide some support to the battered tourism industry. Shares of Lufthansa gained around 2.5% on Monday, after the German carrier announced plans to start flights to over 100 holiday destinations.

A bank holiday in the UK led to low volumes being traded across the European markets. Investor sentiment was supported by strong economic reports on manufacturing and retail sales, while an upbeat earnings season added to the market optimism on Monday.

The IHS Markit manufacturing PMI for the Eurozone rose to a record high of 62.9 in April, from March's final reading of 62.5. Meanwhile, Germany’s retail sales also recorded their strongest year-over-year rise since May 2020.

Around 50% of the companies belonging to the STOXX 600 index have reported their earnings so far, with almost 75% of those exceeding profit expectations.

The STOXX Europe 600 rose 0.58% on Monday, while the German DAX 30 and French 40 added 0.66% and 0.61%, respectively.

What to watch: With no major economic reports from the Eurozone scheduled for release today, investors will await economic data on consumer credit and manufacturing PMI from the UK as the country’s markets remained close on Monday.

Consumer credit in the UK, which fell £1.2 billion in February, is expected to decline another £0.5 billion in March. The IHS Markit/CIPS UK manufacturing PMI is projected to rise to 60.7 in April, from March’s reading of 58.9.

Rising covid-19 cases remain one of the top concerns for markets, with total global infections surpassing 153.1 million.

Other Markets: US indices closed mostly higher on Monday, with the Dow Jones index and S&P 500 up by 0.70% and 0.27%, respectively. The Nasdaq 100 bucked the trend and traded lower by 0.44%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Russia’s manufacturing PMI and Central Bank of Russia’s monetary policy report, France’s government budget value, UK’s mortgage approvals and mortgage borrowing, Canada’s balance of trade, building permits, exports and imports, Mexico’s foreign exchange reserves as well as America’s balance of trade, exports, imports, Redbook index, ISM New York index, factory orders IBD/TIPP economic optimism index and API’s crude oil stockpiles.

 

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