On Monday (February 22) in the Asian session, the dollar index was basically stable, now trading around 90.35; Spot gold short – term rapid decline, gold just fell below $1785 / ounce. Analysts said Treasury yields were climbing again, which weighed on gold prices. On Monday, investors will get a speech from European Central Bank President Christine Lagarde and German business climate data from Ifo, both of which are expected to influence the euro/dollar and thus provide guidance to the dollar index and gold.
Gold tumbled about $40 last week, with much of the downward pressure coming from rising Treasury yields and a stronger dollar. Rising Treasury yields have recently diminished gold’s appeal as an inflation hedge because they have increased the opportunity cost of holding non-yielding bullion.
The yield on the 10-year Treasury note rose as much as 6 basis points to 1.39 per cent in Asian trading on Monday, its highest level in nearly a year. The yield on the 30-year US Treasury rose 3.6 basis points to 2.176%, its highest level since January last year.
According to Economies.com, gold tested $1,785.00 an ounce at one point and is now staying below that level. Gold prices are now starting to fall. As long as gold remains below resistance at $1785.00 / oz, the bearish trend scenario remains in place for some time to come.
In terms of targets, Economies.com said it is now waiting for gold to test its next major bearish target of $1,740.00 an ounce, with the outlook for gold remaining bearish.
The sentiment in the gold market is turning negative after bullion fell to an eight-month low, dragged down by rising bond yields, according to the latest Kitco weekly gold survey released on Friday (19 February).
Eighteen market experts took part in the Wall Street survey last week. Thirteen of them (71%) said they were bearish on gold this week; At the same time, three analysts (17 per cent) are bullish on gold; Two analysts (11%) are neutral on gold.
Most market analysts believe the bond market remains the biggest threat to gold prices in the short term. While inflationary pressures are rising, they are being offset by growing expectations of a stronger-than-expected recovery in economic activity. This sentiment pushes up bond yields, which in turn pushes up real interest rates.
James Hatzigiannis, chief market strategist at Ploutus Capital Advisors in New York, said gold has been battered in recent sessions by rising Treasury yields and the dollar, while the recent bitcoin boom may have also led investors to shift interest away from gold and toward cryptocurrencies. For gold to move back above $1,800 an ounce, a cooling of Treasury yields and confirmation that the new crown is coming to an end will be necessary.
Ole Hansen, head of commodity strategy at Saxo Bank, said he was bearish on gold even if the market continued to see strong fundamentals.
David Madden, senior market strategist at CMC Markets, said he expected bond yields to be a further drag on gold prices.
Daniel Pavilonis, senior commodities broker at RJO Futures, warned that gold could fall to much lower levels if yields and equities continue to rise.
Charlie Nedoss, senior market strategist at LaSalle Futures Group, told Kitco News the dollar will be on the radar this week. Nedoss said the dollar’s strength could fade this week and gold could rebound.
Peter Hug, director of global trading at Kitco Metals in New York, said on the upside, gold needs to break through $1,800 an ounce, which is not a significant resistance level, and then $1,825 to get back to the $1,900 uptrend.
Watch Lagarde speak
European Central Bank President Christine Lagarde is scheduled to speak at 21:45 Hong Kong time on Monday. Ms Lagarde reiterated in recent days that the ECB would maintain its current accommodative monetary policy in order to boost the eurozone’s economic recovery.
Analysts said the euro could take a hit against the dollar if Lagarde’s comments were dovish, while the dollar index could rise. EUR/USD was steady around 1.2120.
ECB President Christine Lagarde said on Feb. 10 that “it will be some time before we worry about inflation,” that monetary easing must continue, and that the ECB could expand its Emergency Bond-Purchase Program (PEPP) if necessary.
‘We are still very far from our inflation target of just under 2%,’ Ms. Lagarde said. “Over the medium term, inflation is certainly not moving strongly towards target, demand will remain weak, wages will remain under downward pressure and at least the exchange rate’s impact on prices will continue to be monitored,” she said.
On Feb. 7, Mr. Gard said Europe’s recovery from the outbreak’s recession was delayed, but should pick up speed from the middle of the year. Lagarde reiterated on the same day that the ECB could still increase its asset purchase quota if needed.
On January 21, the European Central Bank announced to keep three major interest rates unchanged, as expected by the market. The ECB reiterated its very accommodative monetary policy stance and kept the duration and size of its asset purchase programme unchanged.
At the time, the ECB said interest rates would remain at current or lower levels until they were close to the inflation target. Will buy 20 billion euros a month under the asset purchase program; Will reinvest maturing PEPP bonds at least until the end of 2023; The Emergency Emergency Bond Purchase Programme (PEPP) will last at least until the end of March 2022 and will remain at €1.85 trillion.
At the governors’ press conference following the January meeting, Lagarde said the current vaccination programme for the new crown vaccine was an important milestone on Europe’s path to recovery, but the current outbreak still posed a serious risk to the economy, with renewed infections and blockage disrupting economic activity.
On the economic front, the euro is expected to be hit by the release of German February Ifo business climate data at 17:00 Hong Kong time on Monday. A worse-than-expected reading could signal a slowdown in the German economy.
Germany’s Ifo business climate index fell to 90.1 in January from 92.2 in the previous month as business sentiment deteriorated, the Ifo institute said. Ifo President Faust said the second outbreak slowed the pace of economic recovery.
In Germany, the Ifo business climate index is expected to fall further to 89.7 from 90.1 in February, media surveys showed.