Commodity Market: Gold retreats on US bond yield rise, but poised for biggest weekly gain since late December

Spot Gold retreated on Friday, pressured by higher US bond yields. However, stimulus expectations have put the yellow metal on course for its best weekly performance since the business week ended on December 18th.

The yield on US 10-year government bonds remained firmly above 1%, while providing certain support to the US Dollar.

The latest government data showed weekly jobless claims in the US had registered a modest drop last week, but still, worries over the pandemic’s impact remained.

“Gold is struggling due to a lift in nominal yields, which came off the back of strong U.S. jobless claims number, also the European Central Bank (ECB) came out a little less dovish than the market would like,” IG market analyst Kyle Rodda was quoted as saying by Reuters.

“The nervousness on whether the U.S. stimulus is going to pass as smoothly as the market has originally thought is weighing on gold,” Jeffrey Halley, a senior market analyst
at OANDA, said.

The $1.9 trillion relief package proposed by the Biden administration will need to pass through the Senate, while some analysts claim that the aid’s size could get watered down.

As of 10:28 GMT on Friday Spot Gold was losing 0.70% to trade at $1,856.90 per troy ounce, while moving within a daily range of $1,855.36-$1,870.84 per troy ounce. The commodity has gained 1.38% so far this week, while being set for the biggest weekly increase since late December. The yellow metal has retreated 2.34% 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 retreating 0.57% on the day to trade at $1,855.25 per troy ounce, while Silver futures for delivery in March were down 1.99% to trade at $25.340 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching up 0.07% to 90.190 on Friday, while hovering just above Thursday’s one-week low of 90.048.

In terms of macroeconomic data, today Gold traders will be paying attention to the preliminary data on US manufacturing activity for January by Markit Economics due out at 14:45 GMT as well as to the December report on existing home sales due out at 15:00 GMT.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of January 22nd, 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 21st.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,867.79
R1 – $1,877.30
R2 – $1,884.68
R3 – $1,894.19
R4 – $1,903.70

S1 – $1,860.41
S2 – $1,850.90
S3 – $1,843.52
S4 – $1,836.14