08 April 2021

Gold Prices Retreat After Hitting Over One-Week Peak

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News shaping
the markets today

     

What’s happening: Gold prices edged lower on Wednesday, a day after climbing to more than a one-week high.

What happened: Better-than-expected economic reports from the US lifted prospects of a quicker economic recovery, reducing the appeal of the safe-haven metal.

Gold futures, which recorded gains in each of the previous four sessions, closed slightly lower on Wednesday.

Why it matters: The precious metal had surged to a record high of $2,069.40 per ounce in August last year amid low interest rates and weakness in the US dollar. However, prices retreated from record levels on optimism around a global economic rebound as various governments announced initiatives to stimulate growth.

Gold prices gained on Tuesday for the fourth straight session, marking the longest streak in approximately two months.

The US Federal Reserve released minutes of its latest meeting around a half hour after the settlement of gold futures. All members of the Fed agreed to keep the federal funds rate near the zero level, while also noting that economic indicators and employment had “turned up recently, although the sectors most adversely affected by the pandemic remained weak.”

Fed Chair Jerome Powell reiterated the central bank’s commitment to support the economy with bond-buying and low rates.

Data released on Tuesday showed an increase in US job openings to a two-year high level in February, with a ramp-up in covid-19 vaccinations and another stimulus package being announced by the Biden administration.

Investor risk appetite improved further, after the IMF lifted its global economic growth projections to 6% for 2021.

June gold fell $1.40 to settle at $1,741.60 an ounce on the Comex on Wednesday, following a 0.8% rise in the previous session. Spot gold slipped 0.4% to $1,737.01 per ounce on Wednesday.

May silver rose by less than 0.1% to settle at $25.25 an ounce on Wednesday, while May copper declined 1.5% to around $4.06 a pound.

What to watch: With gold futures settling before the release of the Fed minutes on Wednesday, traders will monitor the reaction of gold prices today.

Traders will also keep an eye on any rise in Treasury yields, which exert pressure on gold prices as a rival safe-haven option. Spot gold recovering slightly by 0.09% to $1,739.10 at 5am GMT points towards a higher open for gold futures this morning.

The Markets Today

     

The Australian dollar will be in focus today following the RBA’s interest rate decision.

Context: The Australian dollar traded near two-week highs this morning after the Reserve Bank of Australia kept its monetary policy unchanged.

Details: Australia’s central bank has maintained its cash rate target at a record low level of 0.1% for five straight months. The size of the RBA’s bond-buying program was also maintained, further signalling that the central bank is ready to purchase more bonds in a bid to reduce unemployment and boost wage growth.

On the economic data front, the Australian Industry Group Performance of Construction Index surged 4.4 points to an all-time high of 61.8 in March, while the IHS Markit services index was revised lower to 55.5 in March, from a preliminary reading of 56.2. However, the country’s composite PMI rose to 55.5 in March, from 53.7 in the prior month.

The AUD/USD is also impacted by bond yields. Australia’s 10-year yields settled close to 1.702% on Wednesday, while the US 10-year rates traded at 1.67%.

The Australian dollar rose 0.05% to $0.7617 this morning, trading close to two-week highs, after settling at $0.7613 on Wednesday.

What to watch: With no major economic reports due to be released today, investors await Friday’s economic reports on the Australian Industry Group Australian Performance of Services Index and dwelling approvals.

Rising covid-19 cases remain one of the top concerns for markets, with global infections surging past 132.9 million.

Other Markets: European trading indices closed mostly lower on Wednesday, with the German DAX 30, French 40 and STOXX Europe 600 down by 0.24%, 0.02% and 0.22%, respectively. The FTSE 100 bucked the trend and rose 0.91%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

France’s balance of trade, current account and construction PMI, Eurozone’s construction PMI, producer prices and ECB monetary policy meeting accounts, Germany’s construction PMI, Italy’s construction PMI, UK’s construction PMI, Mexico’s inflation rate, car output, auto exports and central bank monetary policy meeting minutes, Russia’s vehicle sales, South Africa’s industrial production, Turkey’s gross foreign exchange reserves, Argentina’s industrial production as well as the US initial jobless claims and EIA’s natural gas stockpiles.

 

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