Gold is Approaching the Critical Danger Zone

Gold is Approaching the Critical Danger Zone

It is another lukewarm trading for metal markets.

Recently, gold is approaching the psychological threshold of $1,700.00 per ounce after falling to $1,704.00 per ounce on Tuesday’s Asian session.

The metal managed to revert losses, albeit conservatively and steadied at $1,709.34 per ounce in Shanghai for the spot contract after a 0.2% fall.

This price threshold is still considerably near the danger zone which the contract managed to avoid falling into in the past weeks.

This is also its lowest settlement in the last two weeks, particularly since March 8. This makes investors worry about the prospects of the safe-haven asset.

Analysts are convinced that a handful of factors are currently turning out in opposition to the yellow metal.

One of these is Biden’s announcement on vaccine rollouts in the United States. This update subdued the updates on the rise in Covid 19 cases in the country.

In the latest update, new infections rise for the second straight week after a 9% hike to 431,000 new cases, with 33 out of all states reporting a surge.

This is the first time that cases have increased since the January slump. This update is normally supportive of the bullion, but such is not the case this time.

The market is pricing based on Biden’s pledge to further hasten the distribution of inoculation across states.

The leader also pledged to focus on infrastructure development during his administration to support the US economy in the post-pandemic world.

Ironically, this instantaneously sent the silver to weaken along with platinum but came supportive of palladium prices.

Normally, an announcement of further infrastructure investment is supportive of industrial metals, particularly the white metal and copper.

 

Treasury Yields Weigh on Gold Futures 

Strategists are convinced that the biggest puller of gold futures is the rising US Treasury yields.

Long-term government debt has been on investors’ radar for quite a while. It is likely to carry positive momentum through the near term.

The recent announcement of infrastructure focus by the incumbent administration is likely to buoy the yields further up.

This is due to the fact that increased reflation and recovery hopes will ignite increased liquidity and therefore, an overall brighter outlook in the market.

Meanwhile, the strengthening greenback is also another problem for gold. Recently, the US Dollar managed to climb to a 52-week high against the Japanese yen.

Any movement upwards to the dollar is inversely proportional to the movement of the precious metal.

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