Gold prices drifted lower at the fourth trading session of the week. The precious metal lost just under 10% of its value in the first quarter of 2021, posting its worst quarterly decline since 2016.
At press time, gold futures were down by 0.11%, to trade at $1,714 an ounce.
Many factors contributed to the record selloffs in the bullion asset during the first quarter of this year such as low inflation expectations, and a rise in the value of the U.S dollar, U.S Treasury Yields and Bitcoin.
The surging dollar, gold’s archenemy, has powered higher so far, at the expense of gold, which strayed near negative market territory at least twice in March when it lost 20% from its August record high.
In addition, the precious metal has been under immense pressure from a stronger U.S economy, and further compounding the woes of gold bugs, are macros pointing to a $2.25 trillion, eight-year “American Jobs Plan” released by President Joe Biden in aiding the world’s most powerful economy.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on why gold prices are rallying above $1,700 price levels despite the rallying U.S Treasury Yields.
With UST 10-year yields still above 1.70 and the dollar sailing on an even keel, gold seems to have been a significant beneficiary of month-end rebalancing.
What to expect: It is critical to note that the precious metal has underperformed U.S 10-year bonds by 5% and U.S equities by around 15-20%. If there is a need to rebalance portfolios, investors will likely buy the precious metal at the current levels.
Oil prices stay on course as Saudi’s Energy Minister reassures traders
British based oil contract traded at about $63 a barrel while the WTI futures were trading slightly below the $60 price level.
Crude oil prices remained relatively firm at the early hours of Friday’s trading session as oil traders digested Saudi Arabia’s defense of OPEC+ plans in raising output thereby capping gains.
At press time, the British based oil contract traded at about $63 a barrel while the West Texas Intermediate futures were trading slightly below the $60 price level.
Saudi energy minister Prince Abdulaziz bin Salman recently revealed that there were no pressing concerns of demand/supply dynamics changing gear amid the gradual boost in outputs in an interview aired on Thursday, adding that OPEC+ had all ammunition put in place to change course if necessary. OPEC+ will continue to meet monthly on reviewing the energy market supply dynamics.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on the prevailing market sentiment amid macros pointing to more oil supplies hitting the sensitive energy market and an upsurge in COVID-19 caseloads.
“Positioning is much cleaner, although the market remains directionally long oil. However, the sudden calm and drop in volatility have attracted passive investors back to the fray as the market structure around prompt spreads start to tighten and the dollar begins to roll over.
“Still, the conflicting signals around OPEC+ supply coming back to market amid spiking coronavirus case numbers in India plus parts of Canada as well as Tokyo backtracking into the lockdown Abyss, together with reports linking the UK’s Covid-19 vaccine workhorse to the higher frequency of blood clots, continues to hold the bulls at bay.”
What to expect: The most recent OPEC+ agreement on releasing barrels into such present demand was not out of place – suggesting the futuristic price of oil might range between the $60 -$70 price levels with production normalization vs current high excess production capacity taken into consideration.
Gold retreats from 2-week high amid a stronger U.S economy
Gold futures edged lower by 0.20% to trade at $1,739.45 an ounce amid falling U.S. Treasury Yields.
Gold’s price retreated from its two-week high as positive data from the world’s biggest economy bolstered hopes for a quick economic recovery from COVID-19, despite the recent lockdowns seen in Western Europe.
At press time, Gold futures edged lower by 0.20% to trade at $1,739.45 an ounce amid falling U.S. Treasury Yields, while the greenback slipped to a two-week low.
Just recently, the job openings report in the U.S for February posted a two-year high of 7.367 million; hiring also recorded its biggest surge in 9 months.
However, Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on the prevailing market conditions giving the precious metal the needed support in the mid-term amid the falling value in the U.S dollar.
“Gold jumps as the US dollar and yields fall. And with the dollar not responding to “US exceptionalism,” it still leaves room for further price climbs.
Gold prices firmed in volatile Asian and European trading as the Easter holidays ended and full trading got back underway. Gold received support from the FX markets as EUR/USD retained Monday’s gains, putting gold on a firm footing.
And as we all know, gold in a dollar weaker environment tends to remain tethered at the hip to the Euro.”
Metal pundits argue that the current weakening of the greenback and a recent easing in yields will effectively provide the accelerant to a rally in gold and silver in the midterm.
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