Thursday (February 18) in the Asian session, the dollar index was basically stable, now trading around 90.90; Spot gold rebounded after yesterday’s sell-off to trade at around $1,782 an ounce. Analysts pointed out that from a technical point of view, gold prices formed a “dead fork,” which indicates that gold prices may fall further in the future. The European Central Bank’s minutes are due to be released late Thursday in Hong Kong time, and the wording of the minutes is expected to influence the euro.
Gold fell sharply on Wednesday as bets on an economic recovery boosted the dollar and benchmark U.S. Treasury yields. Spot gold ended Wednesday at $1,775.98 an ounce, down $18.47, or 1.03 percent, from an intraday low of $1,769.31. Comex gold for April delivery fell 1.5 percent to settle at $1,772.80 an ounce, the lowest close for the most actively traded contract since late June.
According to Economies.com, gold fell further on Wednesday and briefly approached our waiting target of $1,765.00 an ounce, keeping the bearish trend in place for some time to come. As long as gold remains below $1820.00 / oz, the outlook for gold remains bearish. Once gold falls below $1,765.00 an ounce, this will continue its bearish trend and push prices further lower in the short to medium term, Economies.com said.
Chintan Karnani, market analyst at Insignia Consultants, pointed to a sharp rise in the yield on the 10-year U.S. Treasury note, which is expected to continue rising for the rest of the month.
The yield on the 10-year Treasury note rose as high as 1.333%, near its highest level since late February, reducing the appeal of non-interest-bearing gold assets for investors. Analysts said the rise in Treasury yields to their highest levels in nearly a year reflected Wall Street’s optimism about risk appetite, which has been negative for safe-haven assets.
“The gold market seems fixated on US Treasury yields,” said Bernard Dahdah, analyst at Natixis. Despite the incredible liquidity, we are coming out of the blockade and we expect growth to return to normal levels.” Given this optimism, investors are not interested in safe-haven metals, “he added.
Weak inflation, combined with an improving economic outlook, will continue to weigh on gold prices, Morgan Stanley said.
Bank of America notes that the gold market is facing some difficult challenges as the pandemic continues to put pressure on physical jewellery demand in key markets.
Gold futures closed lower for a fourth straight session on Wednesday as a “death cross” has formed on the technical chart, suggesting a long-term decline is likely ahead.
According to Dow Jones market data, the most actively traded gold futures contract on Wednesday saw its first “dead cross” since June 2018, when its 50-day moving average fell below its 200-day moving average, which is often seen as the dividing line between a long-term uptrend and a downtrend, MarketWatch reported.
Craig Erlam, senior market analyst at OANDA, said the “death cross” is not an ideal development for gold, especially since it has not happened in more than two years. The rise in Treasury yields has made investors a little nervous and has generally been good for the dollar and relatively bad for gold.
Like gold futures, the physical gold daily chart shows that the 50-day moving average also fell below the 200-day moving average, forming a “dead fork.”
The U.S. dollar rose on Wednesday as upbeat economic data and signs of stronger inflation helped the greenback strengthen against a basket of currencies. The dollar index.DXY closed at 90.92, up 0.38 percent, after hitting an intraday high of 91.06. The dollar index traded at around 90.90 in Asia on Thursday.
Data from the US on Wednesday showed retail sales, industrial output and producer prices well above expectations, suggesting that the recovery from the pandemic recession is gaining momentum as vaccine deployment progresses. The closely watched US retail sales data showed seasonally adjusted sales rose 5.3 per cent in January from December, much faster than economists had expected.
On Thursday, key U.S. data on jobless claims, the Philadelphia Fed’s manufacturing index, building permits and housing starts will be released. If these numbers continue to look good, the dollar could see further gains and gold could take more hits.
Minutes from the European Central Bank
At 20:30 Hong Kong time on Thursday, the European Central Bank will release the minutes of its January monetary policy meeting. Analysts said the euro/dollar could be hurt if the ECB minutes were more dovish. It traded around 1.2040 in Asia on Thursday.
ING currency strategists said last week that investors will be watching the minutes of this week’s ECB policy meeting for signs that the central bank has begun to discuss the timing of tapering. Moreover, the European Central Bank plans to prevent the euro from strengthening.
European Central Bank (ECB) President Christine Lagarde recently reiterated that the ECB will continue to maintain the current loose monetary policy unchanged, in order to promote the economic recovery of the eurozone.
Ms Lagarde said keeping monetary policy stable at a time of severe economic contraction in Europe would be positive to boost consumer confidence and reduce uncertainties in the economic recovery.
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.
The ECB said it would extend the duration of reinvestment in QE bonds after the first rate rise and would not stop QE before the rate rise.
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.