Tuesday (April 6) sub-market intraday, the dollar index and gold rare rise together. DXY climbed to 92.70; Spot gold stood at $1,730 an ounce, having earlier breached $1,735. While a stronger dollar is negative for gold, falling U.S. bond yields and expectations of rising U.S. inflation are driving the metal upward, analysts said. President Joe Biden unveiled a $2 trillion-plus infrastructure plan last week, stoking inflation concerns and prompting administration officials to say he would push ahead with more than $2 trillion even if a bipartisan deal could not be reached.
The yield on the 10-year Treasury note spiked to 1.714% on Monday, after briefly breaching 1.74% to a new session high. Treasury yields and gold trends have been negatively correlated recently, Treasury yields will fall to provide momentum for gold prices.
The dollar index against a basket of currencies fell 0.46 percent to 92.59 on Monday, before rebounding to 92.70 in early Asian trading on Tuesday. Gold’s rise rarely goes hand in hand with a stronger dollar, and the relationship is usually in reverse.
FXStreet analyst Dhwani Mehta wrote on Tuesday that gold is getting ready for another rally. Bullion has bounced back from a three-week low of $1,677 an ounce, and bulls want to continue the recovery.
From a short-term technical perspective, gold has been stuck in a range-bound pattern so far on Tuesday, as shown by gold’s four-hour chart, Mehta said. As long as it stays above the 100-cycle moving average of $1,724 / oz, the recovery momentum will remain. The relative intensity index (RSI) remained stable at 60.79. The technical indicator remains above 50.00, indicating a bullish outlook.
Mehta said the 200-cycle moving average of $1,736 an ounce is a level the bulls need to conquer. A break above this level would see gold test the psychological level of $1,750 / oz and then move on to the March 18 high of $1,756 / oz. On the downside, Mehta said that if gold falls below its 100-cycle average of $1,724 an ounce, short targets will target the 50-cycle average of $1,719 an ounce.
According to Economies.com, gold successfully hit its long-awaited target of $1,727.00 an ounce and broke through bearish channel resistance, suggesting further gains could be in store in the coming days.
As gold closed above that resistance, it confirmed a continuation of the rally and opened the door for a rally to $1,765.00 an ounce, Economies.com said.
Wall Street analysts are clearly bullish on gold in the near term, according to the latest Kitco News Gold Survey. Fifteen Wall Street analysts took part in last week’s gold survey by Kitco News. Of those participants, 11 (73 per cent) predicted that gold would rise this week.
Darin Newsom, president of Newsom Analysis, said he is bullish on gold in the short term, but he is watching to see if gold can overcome resistance at $1,756.10 an ounce. Gold continues to face stiff competition against the dollar, which appears to be in a long-term uptrend, Newsom added.
Mark Leibovit, publisher of VR Metals/Resource Letter, said he was also bullish on gold in the near term, but Leibovit cautioned that the correction was not over yet.
Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, said rising inflation data, along with gold’s technical rebound, could prompt investors to buy gold as a hedge against upward price pressure.
For now, investors are focusing on the minutes of the Fed’s latest policy meeting, due on Wednesday.
Jigar Trivedi, commodity analyst at brokerage Anand Rathi Shares in Mumbai, said: “So far the Fed has been committed to keeping rates on hold until the end of 2023, but if inflation picks up, then they will reach their long-term target earlier than expected. If that happens, we will see interest rates go up and that will have a negative impact on gold prices.”
Edward Moya, senior market analyst at OANDA, said gold’s overall direction is uncertain as investors wait to see if the bond market will resume selling.
Biden may push $2 trillion-plus infrastructure plan inflation fears are positive for gold
The U.S. economy added 916,000 jobs last month, the biggest gain since August, Labor Department data showed on Friday. February’s data was revised to show a gain of 468,000 jobs, compared with 379,000 previously. Economists polled by Reuters had forecast a gain of 647,000 jobs in March.
Analysts said Friday’s jobs report, combined with increased confidence that the U.S. economy is restarting, showed a much stronger recovery than expected and could sow the seeds for faster inflation in the future.
Meanwhile, U.S. President Joe Biden unveiled a more than $2 trillion infrastructure spending plan last week, raising concerns about inflation. Gold is widely seen as a hedge against inflation.
On March 31, US President Joe Biden unveiled a $2 trillion infrastructure plan. The eight-year program, part of the Biden-Harris administration’s “Restoring a Better Future” initiative, aims to rebuild America’s aging infrastructure, promote electric vehicles and clean energy, and create jobs.
Biden said the plan would have two components: jobs and households, with a jobs plan to improve and remain competitive in chips, biotechnology, energy, and a plan to build 500,000 charging stations for electric vehicles across the country. The announcement kicks off Biden’s second major initiative since passing a $1.9 trillion coronavirus relief plan earlier in March. A separate economic proposal, to be released by Mr Biden in April, could add another $2tn to the total stimulus.
President Joe Biden is willing to move forward with his $2 trillion infrastructure plan without the support of Republican lawmakers if a bipartisan deal is not reached, Energy Secretary Jennifer Granholm said Monday.
Granholm said Biden wants Republican support, but if that doesn’t work out, he may support a procedural tactic of legislative negotiation that would allow Democrats to pass the infrastructure plan in the Senate.
Analysts say that means Biden will likely once again use the budget reconciliation process to bypass Republicans, requiring only a majority in the Senate, rather than 60 votes. The $1.9 trillion stimulus bill pushed by Mr. Biden was fast-tracked through the budget reconciliation process.
Earlier in March, U.S. President Joe Biden signed a $1.9 trillion economic stimulus plan into law over Republican objections.
Jim Wyckoff, senior analyst at Kitco Metals, said the stimulus package would spark inflation and could be good for gold in the long term.
Bart Melek, head of global strategy at TD Securities, said he expects gold to break above $1,900 by the end of the year because we will see inflation and the Fed will not act. In addition, we will have more debt and more infrastructure spending.