08 June 2021

Gold Shines Brighter, But Closes Below $1,900

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News shaping
the markets today

     

What’s happening: Gold futures settled higher on Monday, although risk appetite remained strong.

What happened: Even as tech stocks rose, gold recorded gains during Monday’s session, buoyed by some weakness in the US dollar.

Despite the upturn in gold prices, the yellow metal closed below the key $1,900 level for a third straight session.

Why it matters: The US dollar traded lower versus most major rivals on Monday. The ICE Dollar index, which measures the greenback versus a basket of six major peers, weakening around 0.2%.

Weakness in the US dollar has a positive impact on commodities priced in the currency, making them less expensive for holders of other currencies.

Meanwhile, the yield on the US 10-year Treasury rose to 1.566%, which could exert pressure on the yellow metal in the near term.

Both the greenback and yields had declined sharply on Friday after the release of the NFP report for May, which helped prices of commodities and precious metals. Although gold climbed, it did not breach the key $1,900 resistance level.

While risk appetite remains strong, investors continued to be concerned about the inflation outlook for the US. Any meaningful rise in inflation could force the US Federal Reserve to scale back its bond purchases earlier than expected and even hike interest rates.

“Nominal yields will therefore remain well below the inflation rate for some considerable time, leaving real interest rates significantly negative. This is a strong argument in favor of a rising gold price,” said Commerzbank analyst Carsten Fritsch.

Gold prices for August delivery rose 0.4% to close at $1,898.80 an ounce on the Comex on Monday, following a 1% gain on Friday. July silver added 0.4% to reach $28.02 an ounce, notching the strongest settlement since Wednesday last week.

In other metals, July copper settled mostly unchanged at $4.53 a pound. July platinum rose 0.9% to $1,174.80 an ounce, while September palladium closed at $2,837.70 an ounce, down 0.2%.

What to watch: Markets will keep an eye on the US inflation report, due to be released on Thursday. Traders will continue to monitor movements of the US dollar and bond yields.

The covid-19 pandemic remains one of the top concerns for markets, with total global infections exceeding 173.5 million.

The Markets Today

     

European stocks will be in focus today, ahead of a basket of economic reports from the region.

Context: European stocks settled mostly higher Monday, despite concerns around rising inflation.

Details: The G-7 countries have recently reached a deal on global taxes and investors continued to carefully monitor its impact on business.

Eurozone banking stocks traded mostly higher on Monday, ahead of the ECB meeting scheduled for Thursday. Policymakers are widely expected to maintain their dovish stance.

“We expect the ECB to maintain its current pace of asset purchases even as the economic restart gains traction,” said BlackRock strategists.

Global investors wait on tenterhooks for the US to release inflation data on Thursday. The US CPI (consumer price index) had risen to 4.2% in April, representing the fastest rise since 2008. If the upcoming data shows another rise in prices in May, investors may respond by shedding riskier assets like European stocks.

Germany reported an unexpected decline in industrial orders for April, due to lower domestic demand amid supply chain disruptions. The German DAX 30 index slipped 0.1% on Monday.

“What is important is the fact that they are all temporary and that the rebound in German industry is set to continue, only not necessarily following a straight line,” said ING analyst Carsten Brzeski.

Meanwhile, the pan-European Stoxx 600 index gained around 0.2% on Monday with auto stocks being the best performers, outweighing the 1.5% decline in shares of basic resources.

London’s FTSE 100 gained 0.12%, while the French 40 rose 0.43% on Monday.

What to watch: Investors await data on employment change, GDP growth rate and economic sentiment from the Eurozone. The number of employed persons is expected to decline 0.3% in the first quarter, versus 0.4% growth in the earlier period. The Eurozone’s economy is projected to contract by 1.8% in the first three months of the year, which would be the fifth consecutive quarter of contraction.

Other Markets: US indices closed mixed on Monday, with the Dow Jones index and S&P 500 down by 0.36% and 0.08%, respectively, while the Nasdaq 100 rose by 0.23%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany's industrial production and ZEW indicator of economic sentiment, France’s balance of trade and current account, Italy’s retail sales, South Africa's GDP growth rate, America’s NFIB small business optimism index, balance of trade, imports, exports, Redbook index, job openings and API’s crude oil stocks, Turkey’s total motor vehicles production, Brazil’s retail sales, auto sales and car production, Canada’s balance of trade, as well as Argentina’s industrial production.

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