25 May 2021

Gold Reaches for $1,900 as Markets Question Fed Direction

Gold inched higher this week and is up 0.45% at $1,882.83, with some resistance gathering as it nears $1,900/oz – last week it reached its
highest price of $1,890/oz since Jan. 8. The U.S dollar weakened by 0.5% over the past week, and U.S. Treasury bond yields hit a near 2-week low of 1.608%.
Market participants are in a tug-of-war on inflation expectations: producers are showing signs of significant price pressures, as consumables are starting to see an uptick in prices (recently released CPI numbers overshot expectations). However, this inflation being evidenced has been countered by Fed officials who this week reiterated that they view inflation as transitory in the U.S.
Markets are therefore trying to determine whether the Fed, not fearing inflation, will remain dovish and continue their stimulus (money printing) measures, or will they start to turn hawkish, fearing inflation, and reduce their expansionary measures.

Investors will also be on the lookout for the release of the U.S. gross domestic product, jobless claims, and durable goods data on Thursday. A forecast miss will signal a stutter in the U.S economic recovery, resulting in a favorable position for gold prices and gold as the safe-haven vehicle.
The yellow metal was last seen trading at $1,884/oz.

Jaco Lups