By Myra P. Saefong and William Watts
Gold climbed Monday, with a decline in Treasury note yields helping prices settle at their highest in almost two weeks, as investors awaited the outcome of the Federal Reserve's monetary policy meeting this week for cues on the precious metal's next move.
Adrian Ash, director of research at BullionVault, believes the recent sell-off in gold may be "taking a pause, if not nearing its end."
With bond yields, and especially real rates, now moving sideways after the recent upturn, gold's current levels "look sticky, because they mark an area of heavy congestion from last spring," he told MarketWatch.
"If the longer-term direction in gold remains higher, and we believe it does," then it's notable that the $1,700 level would prove to be "a resting place and then springboard for the summer's assault on $2,000," he said.
On Monday, gold for April delivery rose $9.40, or nearly 0.6%, to settle at $1,729.20 an ounce on Comex. That was the highest most-active contract finish since March 2, FactSet data shows.
May silver futures also climbed by 38 cents, or almost 1.5%, at $26.29 an ounce.
Prices saw volatile trading after the release of U.S. economic data on Monday, but eventually pared some of their earlier gains. The March Empire State Manufacturing Index rose (link) to a reading of 17.4 from 12.1 in February, the New York Fed said Monday.
Gold ended lower Friday but posted a weekly rise of 1.3%, while silver was up 2.5% for the week. Both metals snapped a three-week skid of falling prices that came as Treasury yields marched higher due, in part, to rising inflation fears stoked by expectations for an accelerated economic recovery. Higher bond yields raise the opportunity cost of holding nonyielding assets like gold.
The yield on the 10-year Treasury note (link) was off 2.1 basis points at 1.614%. Yields and bond prices move in opposite directions.
"Gold is attempting to stabilize after the recent pullback," but if Treasurys bonds continue to fall sharply, prompting yields, which trade inversely to bonds, to spike higher, "then it will be effectively impossible for gold to hold recent lows," analysts at Sevens Report Research wrote in Monday's newsletter.
Gold investors await the outcome of the Federal Reserve's two-day Open Market Committee meeting which ends Wednesday with a statement on monetary policy.
Read:Fed to stay dovish this week as Powell channels his inner Gary Cooper calm (link)
While no change in policy is expected at this week's meeting, "traders will be closely scrutinizing wording on the Fed's economic growth and inflation prospects," said Jim Wyckoff, senior analyst at Kitco.com, in a note.
Among other metals traded on Comex, May copper settled at $4.1405 a pound, little changed for the session. April platinum rose 0.8% to $1,209.50 an ounce and June palladium added almost 0.6% to $2,373.70 an ounce.
The gold-backed SPDR Gold Shares exchange-traded fund was up by 0.4% in Monday dealings.
Ash said outflows from gold ETFs have continued, but are slowing down, "suggesting there's not panic at these levels among last year's record-heavy buyers."
"Comex futures and options have seen a move towards bearish betting among hedge funds and other speculators, but positioning is far from extreme and with prices now $300 off August's peak, the bears look to have missed the big move for now," he said.
-Myra P. Saefong; 415-439-6400; AskNewswires@dowjones.com
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03-15-21 1416ETCopyright (c) 2021 Dow Jones & Company, Inc.