Spot gold hovered near the 1560 mark in Asian trading on Thursday, falling more than 1 percent as tensions between the U.S. and Iran did not escalate further, undermining risk aversion.
Omkar Godbole wrote a brief analysis of gold’s next move:
Gold is poised to regain stability in Asia as yields on us treasuries fall sharply.
Gold is currently trading around $1,560, up about 0.25 percent on the day after hitting a low of $1,552 overnight.
Treasury yields fell
Gold’s rise may be linked to weaker Treasury yields. The yield on the 10-year Treasury note was 1.86 percent at press time, down 1.2 basis points on the day. Gold and yields usually move in opposite directions.
The dollar, gold’s biggest enemy, has also been under pressure in the past few hours.
The dollar index, which tracks the value of the greenback against major currencies, is now expected to trade around 97.28, down about 10 basis points from its overnight high of 97.40.
Geopolitical tensions have eased
President Trump on Wednesday announced new economic sanctions against Iran and stopped short of calling for military action in response to Iranian attacks on U.S. military bases in Iraq.
The comments eased geopolitical tensions and sent U.S. stocks higher. The Nasdaq hit a record high, the s&p 500 and the dow jones industrial average rose 0.5 percent each.
Asian markets are also experiencing a risk reset, with Japan’s Nikkei up 1.9 percent. The Shanghai composite index also rose nearly 1 percent.
As a result, gold is unlikely to rise much. Thursday’s close became crucial as a huge bearish engulf of gold on Wednesday signaled that the bulls had run out.
If gold closes below $1,552 in engulf mode on Thursday, that would confirm a short-term bearish reversal.