Gold is bearish in the London session today, trading below the $1,800 trading range as the dollar gains momentum on increased investor appetite as a result of improved vaccination efforts and a decline in the COVID-19 cases.
Gold futures is down 0.36%, currently trading $1,796.65 an ounce. Gold is down 1.77% from last week’s high of $1,829 an ounce and the yellow metal looks set to end the week bearish. The dollar index, which usually moves inversely to gold, is down marginally by 0.01% for the day, currently trading 92.75.
Reasons for the bearish trend
Investors’ fears and worries are at ease because the number of COVID-19 cases has declined significantly in over half of U.S. states in the last two weeks. The U.S is now averaging about 52,600 new cases a day, a 26% decline from two weeks ago. With the decline in the number of cases, an increase in economic activity in the country is expected thereby pushing investors to take on more risk other than investing in the yellow metal.
Another factor is the rally in Global Shares. South Korea’s KOSPI 50 gained 1.34%, currently trading 3,002.80 points. In Australia, the ASX 200 gained 1.06%, currently trading 7,386.40 points. Hong Kong’s Hang Seng Index gained 1.84%, currently trading 27,700.62 points, nearing last week’s high. China’s Shanghai Composite edged up 0.34%, currently trading 3,574.73 points and the Shenzhen Component closed bullish by 0.18%, currently trading 636.03 basis points.
In the US market, the DOW closed bullish by 0.83% with 34,798 basis points, the S&P 500 recorded a similar percentage growth of 0.83%, trading 4,358.69 basis points and the NASDAQ gained 0.92%, currently trading 14,632 basis points. These gains recorded in global shares indicates that investors have seemingly moved past concerns about the rising numbers of COVID-19 cases involving the Delta variant and inflationary pressures.
What they are saying
DailyFX strategist, Margaret Yang told Reuters that, “Gold prices are under pressure because the dollar is now hovering around highest in three months and Wall Street rebounded for the second day meaning that traders are shrugging off COVID-19 concerns and back to reflation trade. ECB is widely expected to remain dovish, so this may lead the euro to weaken against the dollar causing the greenback to rise, which will be negative for gold. For now, gold’s near-term momentum seems to be tilted to the downside.”
Investors now await reports from the European Central Bank (ECB) and Bank of Indonesia on their respective policy decisions.
In other precious metals, silver is down 0.61%, currently trading at $25.10 an ounce, palladium is up 0.95%, currently trading $2,680.00 an ounce and platinum is up 0.48%, currently trading $1,080.50 an ounce.