Gold Shows in a remarkable display of resilience, gold prices edged higher in European trade on Friday, marking a second consecutive session away from five-week lows. Despite facing headwinds from a robust dollar and climbing US yields, the precious metal exhibited strength, finding support around the crucial $2000 mark.
I.Gold Shows Prices Today
Gold prices registered a 0.3% increase, reaching $2,029 an ounce, with a session-low at $2,020. This upward movement followed a 0.85% rise on Thursday, representing a rebound from five-week lows at $2,001. The psychological barrier of $2000 played a pivotal role in attracting strong demand, supporting the ongoing recovery.
II. Weekly Performance and Dollar Dynamics
Despite the recent gains, gold prices are down 1% for the week, on track for the second weekly loss in three weeks. The dollar index maintained its upward trajectory, rising 0.1% on Friday. This marked the sixth consecutive session of gains
keeping the dollar near a five-week high at 103.69 against a basket of major rivals.
III. Impact of US Yields and Bond Market Dynamics
US 10-year treasury yields rose by 0.7% on Friday, reaching five-week highs at 4.175%. The increase in yields exerted pressure on non-yielding assets, including gold. The developments in the bond market unfolded against the backdrop of strong US labor data and bullish remarks from Federal Reserve officials.
IV. Strong US Data and Fed Remarks
Recent US data showcased a positive economic picture, with retail sales surpassing expectations in December and unemployment claims hitting 11-month lows
indicating robust conditions. Fed member Christopher Waller’s statements on Tuesday emphasized the flexibility of policymakers in deciding the timeline of interest rate cuts.
V. Shift in Market Expectations
The optimistic economic data and Fed remarks contributed to a significant shift in market expectations. The odds of a Fed 0.25% interest rate cut at the March meeting plummeted from 75% to 55%, reflecting a reassessment of the monetary policy outlook.
VI. SPDR Gold Trust Holdings
Gold holdings at the SPDR Gold Trust remained unchanged, standing at 862.1 tonnes. This level is the lowest since November 1
underscoring the challenges faced by gold as an asset class in the current market environment.
In conclusion, gold’s ability to extend its recovery in the face of a strengthening dollar and rising US yields showcases its resilience. While the weekly performance indicates some pressure, the metal’s ability to hold above the $2000 threshold and react positively to economic data and Fed remarks suggests that it remains an asset of interest in the broader financial landscape. Investors will continue to monitor developments in the coming weeks to gauge the metal’s response to evolving market dynamics.