12 April 2021

Gold Settles Lower, But Still Notches Weekly Gain

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News shaping
the markets today

     

What’s happening: Gold futures traded lower on Friday, a day after recording the strongest daily surge for the month.

What happened: Rising US Treasury yields and an uptrend in the greenback exerted pressure on gold prices on Friday.

Despite Friday’s performance, both gold and silver notched weekly gains, as investors bought precious metals in a bid to protect their portfolios from sharp volatility in the equity market.

Why it matters: Despite the US dollar’s climb on Friday, the ICE dollar index, which measures the greenback’s performance versus a basket of six major rivals, ended the week lower by 0.9%.

US dollar priced bullion has an inverse relationship with the greenback, as an increase in the currency makes gold more expensive for buyers from the rest of the world.

Benchmark yields for debt rose again, with yields on the US 10-year Treasury note climbing to 1.660% on Friday. However, the weekly performance remained below the prior week’s 1.72%.

“While overall, gold market is bullish short-term, with expectations of a break higher through $1,760-65, caution about fresh 10- and 30-year auctions and the CPI report next week are keeping yields supported, keeping gold’s advance in check,” analyst Tai Wong of BMO Capital Markets said in a note.

Comments from US Federal Reserve Chair Jerome Powell on Thursday had provided some support to gold prices. The Fed chief emphasized the central bank’s commitment to support the US economy, while warning that a rise in covid-19 cases might impede the economic rebound.

The higher-than-expected surge in America’s producer price index, by 1% in March, led to gold retreating to session lows on Friday. Gold prices pared some losses later but ended the day lower.

June gold fell $13.40, or 0.8%, to close at $1,744.80 an ounce on Comex on Friday, after adding 1% in the previous session to record the strongest finish since February 25 and the highest single-day percentage and dollar surge since March 31. Gold ended the week around 1% higher.

Meanwhile, May silver lost 1% to settle at around $25.33 an ounce on Friday. For the week, the white metal recorded a 1.3% gain.

May copper declined 1.3% to $4.04 a pound on Friday but added over 1% for the week. July platinum fell 2.1% to $1,209.30 an ounce but ended the week with a gain just shy of 0.1%.

What to watch: Traders will keep an eye on economic reports scheduled for release during the week. Markets will also monitor Treasury yields, a rise in which is typically bearish for gold prices.

Gold is likely to remain under pressure today, with the safe-haven metal trading 0.5% lower at 5:30am GMT.

The Markets Today

     

European stocks will be in focus today, ahead of the release of retail trade data from the region.

Context: European stocks rose to a new record high on Friday, with investors weighing prospects of an economic recovery.

Details: European shares have recorded sharp gains this year, outperforming the US equity market. Investors have been buying the region’s undervalued and cyclical stocks on hopes of a vaccine-driven recovery. Bullish sentiment had driven the Stoxx Europe 600 higher last week, sending the index above its record high in February 2020. With this, the index erasing all covid-related losses.

“Equities had a strong run in Q1, with surging inflows and risk-on rotation propelled by vaccine roll-out, fiscal stimulus and dovish policy,” analyst Emmanuel Cau of Barclays said. “Goldilocks’ economy might be here to stay, but given rather stretched positioning, sentiment, valuations and technicals now, more ‘normal’ returns are to be expected.”

The Stoxx 600 index rose 0.1% to close at 437.23 on Friday, notching gains for a sixth straight week. Healthcare and construction stocks supported the market, while energy stocks moved lower.

Meanwhile, AstraZeneca continued to struggle with the rollout of its covid-19 vaccine, as Australia and the African Union limited or abandoned the vaccine amid fears of it developing blood clots.

Investors shrugged of disappointing economic data from Germany, showing a 1.6% contraction in industrial output in February, versus expectations of a 1.5% expansion. Despite this, the German DAX 30 index rose 0.2% on Friday.

The French 40 also gained, albeit by a minor 0.06%. London’s FTSE 100 bucked the trend and closed lower by 0.4% on Friday.

What to watch: Investors await retail sales data from the Eurozone. Eurozone's retail sales, which tumbled 5.9% in January, are expected to rise 1.5% in February.

Rising covid-19 cases remain one of the top concerns for markets, with global infections surging past 135.8 million.

Other Markets: US indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.89%, 0.77% and 0.63%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Turkey’s unemployment rate and current account, France’s retail sales, Central Bank of Brazil’s focus market readout, India's industrial production, manufacturing production and retail price inflation, Canada’s business outlook survey indicator, China’s new yuan loans, outstanding yuan loan growth, total social financing and money supply M2 as well as the US consumer inflation expectations and government budget.

 

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