Commodity Market: Gold gains on US coronavirus aid prospects, Fed Chair’s dovish remarks

After a flat performance a day earlier, Spot Gold rose on Friday, as the prospect of a huge US coronavirus relief package increased the commodity’s appeal as a hedge against inflation.

Additional support to prices came after rather dovish remarks from Federal Reserve’s Chairman Jerome Powell.

US President-elect Joe Biden on Thursday announced a $1.9 trillion stimulus package proposal aimed to support the pandemic-hit economy and speed up vaccinations.

“The stimulus is going to be bullish for asset markets and with the Fed chair quashing any prospects of raising interest rates or dialing down bond buying anytime soon, gold is
supported,” Jeffrey Halley, senior market analyst at OANDA, was quoted as saying by Reuters.

Fed Chair Jerome Powell said yesterday that he saw no reason to change the bank’s highly accommodative policy stance, as the US economy was still a long way from its objectives on inflation and employment.

“Gold’s upside looks constrained amid rising yield and buoyant risky assets. However, a weaker U.S. dollar, stimulus expectations and depressed real interest rates should remain
supportive,” ANZ analysts wrote in an investor note.

As of 10:12 GMT on Friday Spot Gold was gaining 0.48% to trade at $1,855.06 per troy ounce, while moving within a daily range of $1,845.54-$1,856.99 per troy ounce. The yellow metal has retreated 2.32% so far in January, following a 6.84% surge in December, or its best performance since July.

Meanwhile, Gold futures for delivery in February were edging up 0.18% on the day to trade at $1,854.80 per troy ounce, while Silver futures for delivery in March were down 1.08% to trade at $25.523 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging up 0.15% to 90.379 on Friday, while extending a rebound from last week’s more than 2 1/2-year low of 89.209.

In terms of macroeconomic data, today Gold traders will be paying attention to the December reports on US retail sales and industrial production due out at 13:30 GMT and 14:15 GMT respectively.

Additionally, traders will be expecting the preliminary results from Thomson Reuters/University of Michigan’s monthly survey on US consumer sentiment for January due out at 15:00 GMT.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of January 15th, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on January 26th-27th, or unchanged compared to January 14th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,844.45
R1 – $1,859.41
R2 – $1,872.55
R3 – $1,887.51
R4 – $1,902.47

S1 – $1,831.30
S2 – $1,816.34
S3 – $1,803.19
S4 – $1,790.04