Search ForexCrunch
  • Spot gold continues to trade within $1725-$1745 parameters, with the 21-day moving average acting as a magnet.
  • Last Thursday’s lows at just under $1720 and highs at $1755 remain the key areas of support and resistance.

It continues to be an uninspired week for spot gold (XAU/USD) markets; the precious metal continues to trade within $1725-$1745ish parameters, with the 21-day moving average, which currently resides around $1732, acting as a magnet to the price action. On the day, gold is up a modest 0.4% or about $8. Last Thursday’s lows at just under $1720 and highs at $1755 remain the key areas of support and resistance.

Driving the day

With long-term US government bond yields having pulled back substantially from last week’s highs, bond market trade has been subdued this Wednesday; the 10-year yield trades flat on the day at just under 1.65%, more than 10bps below last week’s highs. While this week’s pullback in yields has been supportive for gold, an advancing dollar has been the counterweight to keep gold prices broadly flat on the week; the DXY on Wednesday hit fresh annual highs above 92.50, after starting the week under 92.00.

In recent trade, however, the US dollar has been going sideways; the DXY appears to have run into resistance at its 200-day moving average, while a combination of very strong March Eurozone and UK PMI surveys and a weak February US Durable Goods Orders report (the latest in a string of soft US hard data releases for the month of February) is offering some support to the likes of EUR/USD and GBP/USD – what’s bad for the dollar is generally good for gold, so as long as DXY does continue to struggle as it approaches its 200DMA and rates continue to head lower, this ought to be good for gold.

A few big events later in the week are worth noting, however, given they could inject some fresh direction into bond and gold markets; US President Joe Biden is set to give his first press conference since taking office on Thursday at 17:15GMT. He will be grilled on a range of topics, but the main concern for the market is  the next fiscal stimulus package. Reports over the last few weeks have suggested the next infrastructure-focused spending bill could have a price tag of anywhere between $1.5-$4T. Most political commentators seem to expect something in the $3T ballpark.

Interestingly, a Fox Business News reporter just tweeted out that a growing number of “big investors” think that the Fed is soon going to launch a yield curve control policy in order to keep interest rates in check amid all the coming US government debt issuance; such a development could be very bullish for gold as it would 1) further increase the money supply and debase the dollar, 2) push eventual monetary tightening further into the future and 3) likely be inflationary, given the combination of fiscal and monetary stimulus.