Gold Gains Ground as Dollar Stalls

Gold gained some ground on Monday after a stall in the dollar‘s rally helped bulls partially recoup their losses after being mauled by the yellow metal’s recent plunge.

Front-month gold futures on New Yorks Comex settled at $1,782.90, up $13.90 or 0.8%. Comex gold lost $110, or 5.9%, last week for the biggest drop of its kind since the week ended March 6, 2020. The loss came after a seven-week low of $1,768 set for the benchmark gold futures contract.

The spot price of gold was at $1,783.13 by 19:34 GMT, up $18.80, or 1.1%. The spot price lost $113, or 6%, last week, also the biggest weekly decline since the week to March 6, 2020. The loss came after a seven-week low of $1,765.91 for spot gold.

Traders and fund managers sometimes decide on the direction for gold by looking at the spot price — which reflects bullion for prompt delivery — instead of futures.

Gold regained some ground as the Dollar Index slowed its advance, retreating by 0.4% to 91.85 after last weeks climb to 92.4.

“Gold prices are attempting to stabilize after last weeks bloodbath,” said Ed Moya, analyst at online trading platform OANDA.

“Wall Street is starting to expect a lot less stimulus getting pumped into the economy and that has been kryptonite for gold. The Feds upgraded forecasts was mostly them playing catchup with their forecasts and the surge with yields at the shorter end of the curve was warranted.”

The dollars advance paused after two senior Federal Reserve bankers suggested that the Fed could wait with a rate hike until 2023 but not its stimulus tapering.

“The Fed will need to be ready to make changes to tapering,” St. Louis Fed President James Bullard said, referring to the shifts required to the central banks monthly purchase of $80 billion in Treasury bonds and $40 billion in mortgage-backed securities. “If you wait too long to taper and your imbalances worsen, you may find yourself needing to take extra steps down the line.”

Dallas Fed President Robert Kaplan, meanwhile, said Monday that he anticipated 2021 inflation to be at 3.4%, above the current rate of 2.4% predicted by the bank for all of this year.

“Gold will eventually return to becoming both an inflation hedge and safe-haven asset, but for now it trades solely as a risky asset,” said Moya of OANDA. “Something will break gold‘s way over the short-term, either stocks start to feel the rumblings of a sooner-than-expected taper tantrum or the dollar’s rebound is temporary.”

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