The price of spot gold surged by 0.2% to reach $1,922.50 per ounce at 0814 GMT, maintaining its proximity to its highest point since August 10, which was reached on the preceding day. Correspondingly, U.S. gold futures also displayed a 0.2% increase, standing at $1,950.30.
Notably, gold prices are experiencing a surge in short-covering by speculators, a phenomenon attributed to the overcoming of a minor resistance point at $1,907. This level coincides with the 200-day moving average. Kelvin Wong, a senior market analyst at OANDA in the Asia Pacific region, emphasized this factor.
The momentum for gold is further propelled by a decline in the U.S. dollar against a basket of prominent currencies. Additionally, benchmark U.S. 10-year Treasury yields have distanced themselves from the peak levels observed in 2007 during the previous week.
The inverse correlation between the U.S. dollar and gold comes into play as a weaker dollar renders gold, which does not yield interest, more affordable for holders of various currencies.
Federal Reserve Chair Jerome Powell’s recent remarks underscore the persistent struggle against inflation. This has triggered a revival of interest in the stagflation playbook scenario, potentially contributing to the increased demand for gold as an asset for diversification.
Amidst the array of forthcoming U.S. economic data releases, significant focus centers on two pivotal aspects. Firstly, market attention is directed towards the PCE price index, the Federal Reserve’s favored inflation measure, set for unveiling on Thursday. Moreover, Friday will see the release of the non-farm payrolls report, further igniting interest among investors.
Heraeus analysts postulate that with elevated interest rates, a consequential slowdown in consumer spending is likely to transpire, elevating the potential for an impending recession. This scenario could lead to a decline in bond yields and a weaker dollar, consequently triggering a rebound in gold prices.
SPDR Gold Trust, renowned as the world’s largest gold-backed exchange-traded fund, reported a 0.3% increase in holdings on Monday, indicating an upward trend in interest and investment in the precious metal.
In parallel developments, spot silver witnessed a decrease of 0.2% to attain $24.22, while platinum exhibited a marginal easing of 0.2% to reach $962.23. Notably, platinum maintained its position in proximity to its highest level observed in a month. Palladium, on the other hand, experienced a decrease of 0.4%, recording a value of $1,248.80.
These market dynamics underline the intricate interplay between economic indicators, interest rates, and currency valuations, all of which contribute to shaping the landscape of precious metals trading.
