Gold prices bounce around as stronger dollar offsets benefit of sliding bond yields

0
185


Gold futures on Wednesday traded on either side of unchanged as a rally in government bonds across the globe pointed to increased appetite for assets perceived as havens, but gains for bullion were kept in check as the a measure of the dollar ticked higher.

April gold












GCJ9, -0.08%










 on Comex was virtually unchanged at $1,315 an ounce, hovering near its loftiest close for a most-active contract since Feb. 26 at $1,322.60, according to FactSet data.

The gold-backed SPDR Gold Shares exchange-traded fund












GLD, -0.50%










 was up 0.1% in premarket action.

Gold’s wobbly trade action on Wednesday come as the benchmark 10-year Treasury yield












TMUBMUSD10Y, -1.13%










was hovering around its lowest since 2017, touching 2.352% and a gauge of the dollar’s strength against a half-dozen currencies, the ICE U.S. Dollar Index












DXY, +0.02%










edged up 0.1% to 96.82.

“Gold prices are slightly higher, but still showing no signs of breaking out,” wrote Edward Moya, market analyst at Oanda.

On Wednesday, European Central Bank President Mario Draghi said the central bank could hold off on raising interest rates even longer than currently expected if the eurozone economy showed furthers signs of weakness.

“If necessary, we need to reflect on possible measures that can preserve the favorable implications of negative rates for the economy, while mitigating the side effects, if any,” he said at a conference in Frankfurt.

His comments were attributed with driving German bond yields












TMBMKDE-10Y, -218.25%










deeper in to negative territory.

Draghi’s comments come three weeks after the ECB responded to Europe’s recent economic slowdown by signaling it won’t raise its key eurozone interest rate, currently set at minus 0.4%, before next year. The ECB also lowered its forecast for gross domestic product in the region to 1.1% from 1.7%.

Meanwhile, after the House of Commons seized control of the Brexit process late Monday, various alternatives to Prime Minister Theresa May’s withdrawal plan, ranging from a second referendum to a customs union, will be voted on later Wednesday. The nonbinding votes are being used to gauge what options have the most support.

Fear of a disorderly Brexit, or British exit from the European Union, has fueled buying in haven assets like gold, commodities strategists say.

Meanwhile, U.S.-China trade negotiations under way in Beijing also were being watched for a possible resolution to emerge in the coming weeks, with a pact holding the potential to boost appetite for risk taking on Wall Street, hurting gold buying.

“Falling Treasury yields, and a gloomier outlook have provided a bid for the precious metal, but gains are capped on optimism for the U.S. and China to reach a trade deal in the next couple of months and high expectations the U.K. will not have to deal with a hard exit,” Moya wrote in a Wednesday research note.

Low interest rates can help support demand for gold which doesn’t offer a yield, while a slumping dollar is bullish because commodities tend to be priced in bucks and a softer dollar makes those assets comparatively less expensive.

On the economic front, the U.S. trade deficit decreased by 14.6% in January, driven by rising exports and falling imports, the Commerce Department report shows. The U.S. exported $7.1 billion in goods to China in January, matching the lowest level since September 2010.

Elsewhere on Comex, May silver












SIK9, -0.45%










 was 0.3% lower at $15.388 a pound, while May copper added a penny, rising 0.4% to $2.864 a pound. April platinum












PLJ9, +0.92%










advanced 0.7% to $866.20 an ounce, and June palladium












PAM9, -1.68%










lost 1.7% to $1,491.50 an ounce.



Source : MTV