- Spot gold dropped below $1820 on the first trading day of the week, despite broad weakness seen in USD.
- Gold markets seem to be in wait-and-see mode ahead of what will be a very busy week.
Spot gold prices (XAU/USD) dropped on the first trading day of the week, despite broad weakness seen in the US dollar and strength seen in other precious metals, including silver, platinum and palladium. XAU/USD attempted to stage a rebound into the upper $1820s during Asia Pacific trade, but reversed during European trading hours and has since dropped back under the $1820 mark as Tuesday Asia Pacific trade gets underway. Spot gold prices currently sit near-enough equidistant between last Friday’s highs around $1830 and last Friday’s lows around $1810 and subdued trade is likely to continue into the Asia session which is expected to see lower than normal volumes given Chinese markets are shut for Lunar New Year celebrations.
Driving the day
US bond markets were closed on Monday on account of Presidents’ Day in the US (equity markets were also closed and US session FX and commodity market volumes have subsequently been very low). Thus, gold has instead opted to take its cue from USD flows and global risk appetite. It seems as though a lack of demand for precious metal safe havens given the optimistic tilt to risk appetite on Monday outweighed mild weakness seen in the US dollar; Covid-19 cases continue to fall in the US and the country’s 7-day moving average of new daily infections is below 100K for the first time since last November. A similar trend is being observed in the UK, where the government reportedly expects the number of Covid-19 hospitalised patients to halve over the next month.
Meanwhile, the UK hit a key vaccination milestone (15M of the most vulnerable four categories of the population all having received their first jabs), which, when combined with falling virus cases, opens the door for a relaxation of Covid-19 restrictions. Pandemic optimism comes amid the already favourable to risk appetite backdrop of expectations for another large US fiscal stimulus package and accommodative central banks. This seems to have prevented gold from gained amid a slightly softer US dollar on Monday.
More broadly though, it is not a surprise to see spot gold markets in something of a wait and see mode at the start of what is going to be a very busy week. This week, gold bugs will be on the lookout for updates regarding the path of US fiscal stimulus in the US Congress, updates regarding global vaccination and infection trends in the Covid-19 pandemic, the release of the minute from last month’s FOMC meeting, as well as US data in the form of US January Retail Sales on Wednesday and preliminary US February PMIs on Friday!
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