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Gold firms near multi-month highs on weaker dollar, yields

Gold firms near multi-month highs on weaker dollar, yields

25 May 2021

Gold reversed course on Tuesday, climbing towards last week’s 4-1/2-month peak, supported by a weaker dollar and bond yields after Federal Reserve officials affirmed their support to keep monetary policy accommodative for some time.

Spot gold was up 0.2% to $1,885.47 per ounce by 0724 GMT, after falling as much as 0.5% earlier in the session.

US gold futures edged 0.1% higher to $1,886.50.

“Weak dollar, rebound in investment demand and no major threat of tapering in near term from the US Federal Reserve are major reasons for gold achieving $1,885 recently,” said Jigar Trivedi, commodities analyst at Mumbai-based broker Anand Rathi Shares.

The dollar index slipped 0.3% to its lowest since Jan. 7 against its rivals, making gold less expensive for holders of other currencies.

Benchmark US Treasury yields fell to a two-week low, reducing the opportunity cost of holding non-interest bearing gold.

Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.3% to 1046.12 tonnes on Monday.

“Gold’s critical support level lies around $1,845 an ounce, its 200-day moving average. As long as it holds above there, the uptrend remains intact,” OANDA senior market analyst Jeffrey Halley said.

“Resistance remains at $1,890, after which I expect $1,900 to give way quite quickly on option and algo buy-stops, rising to $1920 an ounce.”

St. Louis Fed President James Bullard said he expects the inflation rate to be above 2%, but comments from several Fed officials, including Bullard, supported the view that policy will remain on hold for some time.

Asian shares climbed in early trade, tracking a Wall Street rally overnight.

Elsewhere, palladium rose 1.1% to $2,758.16 per ounce, after falling to a one-month low on Monday.

Silver fell 0.3% to $27.72, while platinum was steady at $1,175.