The price of gold edged lower on Thursday amid rising Treasury yields, a firmer US Dollar and the increasing appetite for risk.
The precious metal was trading close to a two-week peak scaled in the last session as the dovish US and European central banks fanned concerns on economic slowdown and kept global bond yields and the dollar under pressure.
The spot gold was down by 0.97% at 1,294.80 USD per ounce, after touching its highest since March 28 at 1,310.50 USD in the previous session. The precious metal lost more than 12.7 USD during the session, after the release of the minutes of the Federal Reserve’s March monetary policy meeting, which packed no surprises. Gold added to losses after a reading of weekly jobless claims for the seven days ending on April 6 showed that claims sank below 200,000 for the first time since 1969, falling by 8,000 to 196,000.
The US gold futures were down about 1.2% at 1,299.10 USD per ounce, registering even stronger fall.
Gold drew support from political and economic worries such as the Brexit, US politics and trade tensions between Washington and China and the Euro Zone. Lower interest rates reduce the opportunity cost of holding non-yielding gold, which is seen as a safe haven during times of political and economic uncertainty.
Traditionally, gold is a safer asset, so fears about global economic growth and trade have boosted demand for the precious metal.
While gold prices are above 1,300 USD per ounce, the investors are looking for more reasons to buy the metal. The precious metal should see support toward 1,300-1,305 USD per ounce, while a consolidated break through 1,310 USD per ounce could raise further interest.
Meanwhile, the holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold TrustGLD, fell for the seventh consecutive session on Tuesday and are at their lowest level since November.
Meanwhile, the Chinese appetite for gold is growing rapidly, and for the fourth consecutive month, the world’s second-largest economy has increased its reserves of precious metals. This brought optimism that, on a global scale, central banks would continue to raise its stockpiles.
People’s Bank of China’s reserves rose to 60.62 million ounces in March from 60.26 million ounces a month earlier. Measured in tons, Chinese gold stocks rose by 11.2 tons in March, compared to a growth of 9.95 tons in February.
Last year, central banks around the world increased their reserves by 651.5 tonnes, which is a record level, according to World Gold Council data. The most significant increase is for Russia, which has increased four times its reserves over the last decade.
Among other precious metals, spot platinum gained about 0.6% to 905.98 USD per ounce. Palladium was down by 0.2% at 1,385.05 USD per ounce, while silver inched 0.2% lower to 15.18 USD per ounce.
Gold price analysis
The gold stalled its recent positive momentum to two-week tops and started correcting from a resistance marked by a descending trend-line, extending from 10-month tops set in February. The negative news from the gold triggered a serious fall today, which resulted in wiping out about 1% from its price.
Gold futures broke sharply shortly after the regular session opening on profit-taking after an almost week-long rally. The catalysts behind the selling pressure were rising Treasury yields, a firmer US Dollar and the increasing appetite for risk. Despite the weakness, some investors believe the combination of dovish central bank policy and forecasts calling for a slowing global economy are likely to underpin gold prices.
The main trend is down according to the daily swing chart. A trade through 1,330.80 USD will change the main trend to up. A move through 1,284.90 USD will signal a resumption of the downtrend.
The short-term range is 1,284.90-1,314.70 USD. Its retracement zone at 1299.80-1296.30 USD is currently being tested and act as support. This zone is very important because aggressive counter-trend buyers are going to try to form a secondary higher bottom. Sellers are going to try to drive the market through 1,296.30 USD in an effort to form a new main top at 1,314.70 USD.
Based on the early price action and the current price, the direction of the June Comex gold market the rest of the session is likely to be determined by trader reaction to the short-term 50% level at 1,299.80 USD.