International spot gold took another tumble on Thursday, hitting as low as $1,770.51 an ounce, down more than $30. The day was full of different themes, but the biggest was still the surge in global government bond yields. While the pressure on Wall Street brought some money into the gold market, it was weighed down by a sharp drop in safe-haven demand due to improving economic data and hopes of an acceleration in vaccinations. After Posting its biggest annual gain in a decade in 2020, gold is down more than 5 per cent so far in 2021. Goldman Sachs also cut its forecast for gold, citing a shift into riskier assets as one reason for the price’s underperformance.
The US released the latest GDP, inflation and employment data during the day. U.S. initial claims for state unemployment benefits fell to 730,000 in the week ended March 20 from 841,000. US durable goods orders jumped 3.4% month-on-month in January; America’s real GDP grew at a revised 4.1% annualized rate in the fourth quarter. The number of Americans filing new claims for jobless benefits fell sharply last week, suggesting the pace of job losses is slowing as the rate of infection from the new pandemic declines and vaccination campaigns accelerate, agencies said. The strength of economic data has helped market risk sentiment improve significantly.
Zerohedge notes that, for those who follow inflation measures, the GDP price index rose 2.1% in the fourth quarter after rising 3.5% in the third quarter; That was above the consensus forecast of 2 per cent.
Despite the weakness of the dollar and a lull in Treasury yields, gold has yet to make a meaningful recovery. With the global recovery in trade in full swing, it seems only a matter of time before yields move higher again. This will again put pressure on gold. Its role as an inflation hedge now seems to be limited to wage/price spirals rather than temporary cost-push inflation.
On the other hand, the renewed rally in bitcoin has also helped draw some of the safe-haven money away, making gold’s recovery a bumpy one.
Technically, gold faces resistance in 1817, followed by the $1830 / oz area. The area between $1848 and $1,860 remains a strong resistance for gold, containing 50, 100 and 200 dma.
The initial support level is $1,784, while the double bottom, Fibonacci 50 per cent level is at $1,760, a key support level that gold must hold. A loss would doom gold to fall further into the $1,600 area.
In addition, according to the monitoring data of the world’s eight major gold ETFs from the gold information website www.24K99.com, as of February 24, 2021, the total holdings of the world’s eight major gold ETFs were 1,930.737 tons, a decrease of 4.88 tons compared with the previous trading day.
Jim Wycoff, senior market analyst at Kitco, noted that rising government bond yields were negative for precious metals in the middle of the week. The bulls are also struggling from a technical perspective, with gold in a downtrend on the daily chart.
But Sunilkumar Katke, head of FX and commodities at Axis Securities, said: “Once the market has absorbed all the positive factors driving risky assets and starts to consolidate, gold could recover and hit the $2,000 level again this year.”