The gold reached its support of $ 1,800 due to a wave of sales under pressure from signs of a recovery in the US labor market and the snag around Covid-19 stimulus plans in the Biden administration.
April gold futures settled on New York’s Comex at $ 1,791.20 an ounce as a competing asset, the dollar, gained in value against almost every currency except the pound.
The pressure from the dollar was also compounded by an increase in US treasury revenues. Yields on ten-year bonds reached one-year highs of 1.158%. The combination of a stronger dollar and yields usually suppresses gold.
“The price of gold helps contribute to the strength of the dollar,” not the other way around, “said Greg Michalowski, a ForexLive analyst, noting that the dollar and bond yields are strengthening despite the growing US deficit and debt over the Covid-19 pandemic.
But gold has suffered a deep loss in recent months since early August, reaching a record high of almost $ 2,090 an ounce, as groundbreaking Covid-19 vaccines indicated a rapid economic recovery from earlier lockdowns.
However, this economic recovery has hardly materialized due to a new increase in infections and deaths from the virus and slower-than-expected vaccination. These factors have not stopped currency and debt traders from continuing to anticipate faster GDP growth and declining stimulus, although the Federal Reserve has repeatedly said none of them would be as fast as hoped.
Thursday’s strengthening of the dollar and bond yields came after US unemployment fell by 4% last week, marking their third weekly decline, indicating a slight recovery in the labor market. President Joe Biden and the Democrats who supported him have so far been cautious, planning to present a $ 1.9 trillion stimulus to Congress against the apparent objections of rival Republicans.
OANDA’s Ed Moya said: “The longer-term outlook is still bullish for gold. Some basic support should be provided by the rapid completion of the $ 1.9 trillion relief plan from President Biden’s stimulus. ”