Gold slipped last Thursday. The commodity was weighed down by the value of the dollar which is now becoming stronger. In addition, the America Treasury yields which are higher are also one reason. Elsewhere, the prospect of more fiscal stimulus is also having an impact.
It is likely that fiscal stimulus under the win of Democrate administration in Washington could cover the losses. This is especially for economic conditions that are deteriorating due to the effects of the coronavirus pandemic. Even the number of positive cases continues to increase until now.
Spot gold reportedly fell as much as 0.3% to $1,913.87 an ounce. U.S. gold futures closed up 0.3% to $1,913.60. Previously, this commodity was among the most stable and managed to maintain its rising position for some time.
Impact of American Treasury Yields
Prices weakened as much as 2.5% after the key commodity hit its highest level since November 9 on Wednesday. What caused it? Many experts expect the situation to happen as US Treasury yields in 10 years soar above 1% for the first time.
More precisely is since March last year. Those high Treasury yields also attracted some "runaway money from the gold market." This was conveyed by Bob Haberkorn, the RJO futures’ senior market strategist. It can be said that the strengthening USD is now weighing on gold.
But while that condition happened, the greenback's upper hand is unlikely to last long. The dollar index rebounded from multi-year lows. This condition makes bullion is not that attractive for other currencies’ holders.
The Democratic party's victory in the second round of the U.S. Senate fueled expectations of inflation. This is because investors are raising bets about more fiscal stimulus. Meanwhile, the US Congress is rumored to have certified President-elect Joe Biden's victory.
Additional Stimulus Opportunities After Senate Hearings
A great victory by Democrats in Georgia raised expectations of greater stimulus support. It also allows for higher infrastructure spending in the future or when Joe Biden starts his era in the United States. That opinion was conveyed by a Standard Chartered analyst named Suki Cooper.
He added that higher inflation expectations generated may support the momentum of gold's rise. This means that the price of this main commodity still has a chance to rise again in the future. Therefore, market participants should pay attention to every update.
From the technical aspect, gold is no longer in 'overbought' territory. $1,965 an ounce is the main resistance level. It was supported with short-term support of about $1,894. Non-yield metals are still considered to be hedging against inflation and possible currency impairments.
U.S. Dollar Recovers
The U.S. dollar traded at a higher rate against all major currencies on Thursday. That condition occurred because the uncertainty of U.S. politics was finally resolved. Last night, Joe Biden was certified as the winner of the 2020 election and finally, Trump gave his confession
In his statement, President Trump said there would be an orderly transition on January 20. Control of Congress has been resolved with a Democratic victory in Georgia. Currencies and equities welcomed this development and were seen in the Dow Jones Industrial Average which rose 211 points.
Furthermore, the dollar is up overall. Amid all yesterday's wild developments in Washington, people will be easier to forget about the non-farm payrolls week. NFP is one of the most market-moving parts of the America data. In addition, economists started calling for job growth.
For the first time in eight months, the US economy may add less than 100,000 jobs in December. Many say that they have never seen such a bad number. It is especially since a tight lockdown in the spring. They hope that economic conditions can recover and be better.
