By Barani Krishnan
Investing.com - Gold prices fell for a second straight day on Monday, remaining stuck under the key $1,750 per ounce level despite a sluggish dollar and marginal advances in U.S. bond yields.
Benchmark gold futures on New York’s Comex settled down $12.10, or 0.7%, at $1,732.70 an ounce.
The spot price of gold was down $13.14, or 0.8%, at $1,730.80 by 3:00 PM ET (19:00 GMT). Moves in spot gold are integral to fund managers, who sometimes rely more on it than futures for direction.
Both spot and gold futures broke above $1,750 on Thursday, smashing the key resistance the first time in six weeks, as bond yields and the dollar retreated from their recent highs.
They have slipped below that marker since despite range-bound moves in the dollar and U.S. bond yields.
On Friday, the benchmark yield on the U.S. 10-year Treasury note hovered at 1.675% versus its 14-month high of 1.77% hit on March 30.
The Dollar Index, which pits the greenback against the euro and five other major currencies, was at 92.17, versus the 93 level it scaled on April 5.
“Gold traders are waiting to see if the 1.75% cap put in place for the 10-year Treasury can hold,” said Ed Moya, head of U.S. markets analyst at online broker OANDA.
Technical charts for both Comex and spot gold indicate a potential return to $1,750 pricing, said Sunil Kumar Dixit at SK Dixit Charting in Kolkata, India.
“The formation holds good as long as daily closes above 1730 and more importantly 1720,” Dixit said.
Gold had a scorching run in mid-2020 when it rose from March lows of under $1,500 to reach record highs of nearly $2,100 by August, responding to inflationary concerns sparked by the first U.S. fiscal relief of $3 trillion approved for the coronavirus pandemic.
Breakthroughs in vaccine development since November, along with optimism of economic recovery, however, forced gold to close 2020 trading at just below $1,900.
Since the start of this year, gold has had more headwinds as the dollar and bond yields often surged on the argument that U.S. economic recovery from the pandemic could exceed expectations, leading to fears of spiraling inflation as the Federal Reserve kept interest rates at near zero.
Gold’s fall from grace in 2021 is more remarkable if considered from the perspective of the additional Covid-19 relief of $1.9 trillion passed by Congress in March, and the Biden administration’s plan next for an infrastructure spending bill of $2.2 trillion.
The dollar debasement from these stimulus measures should have sent gold rallying as an inflation hedge. But the opposite has often happened.
Moya said theoretically, inflation risks were growing and that should keep central bank buying of gold strong going forward.
“Gold volatility is slowing down and while the bullish case has some holes in it, the outlook should still be for much higher prices later this year,” he said. “Gold has massive support at the $1700 level and if this holds over the next couple of days, prices should grind higher towards $1800 over the coming weeks.”