Commodity Market: Gold retreats as US Dollar, US Treasury yields rise, US PCE inflation data now eyed

Spot Gold retreated on Friday, as the US Dollar extended a rebound from 20-week lows and the yield on US 10-year government bonds rose above 1.6%, which increased the opportunity cost of holding the non-yielding precious metal.

Meanwhile, market players are now expecting the key US personal consumption data due out later on Friday for clues over inflationary pressure.

“Gold has been a little bit on the defensive side. Technically it was very overbought and on the fundamental side, the dollar had a big move up yesterday and that started to impact gold,” Edward Meir, an analyst at ED&F Man Capital Markets, was quoted as saying by Reuters.

“Gold is likely to consolidate around this $1,900 mark for a little while longer. Maybe with the next set of numbers that are more inflationary, we could start another move up.”

As of 8:25 GMT on Friday Spot Gold was edging down 0.28% to trade at $1,891.38 per troy ounce, while moving within a daily range of $1,887.97-$1,898.61 per troy ounce. The commodity rose as high as $1,912.78 on Wednesday, which has been its strongest price level since January 8th ($1,917.54 per troy ounce).

Gold was on track to register its fourth straight weekly advance, while being up 0.55%. The precious metal has gained 6.75% so far in May, following another 3.78% surge in April.

Meanwhile, Gold futures for delivery in June were edging down 0.32% on the day to trade at $1,889.60 per troy ounce, while Silver futures for delivery in July were down 0.50% to trade at $27.800 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 0.14% to 90.125 on Friday. The DXY slipped as low as 89.535 on May 25th, which has been its weakest level since January 7th (89.321).

In terms of macroeconomic data, today Gold traders will be paying attention to the April report on US personal income, personal spending and Core PCE inflation due out at 12:30 GMT as well as to the final data on US consumer sentiment for May due out at 14:00 GMT.

“It’s likely that even if inflation is higher than expected, the central bankers are going to be still dovish,” Avtar Sandu, senior commodities manager at Phillip Futures, wrote in an investor note.

“What really matters for gold are real rates … central bankers would continue to keep the rates low, which would be bullish for gold.”

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of May 28th, investors saw a 92.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on June 15th-16th, or unchanged compared to May 27th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,896.23
R1 – $1,904.15
R2 – $1,911.62
R3 – $1,919.54
R4 – $1,927.45

S1 – $1,888.76
S2 – $1,880.84
S3 – $1,873.37
S4 – $1,865.89