Gold Retreats from 2-month High as U.S. Dollar Weighs

Dollar extends gains as markets focus on U.S. data


LONDON- Gold prices on Tuesday retreated from the previous session’s more than two-month high on a stronger dollar ahead of a slew of U.S. economic data, while palladium held firm near record highs hit last week on supply concerns.

Spot gold was down 0.4% at $1,785.26 per ounce by 0925 GMT, after hitting its highest since Feb. 25 at $1,797.75 on Monday.

Carlo Alberto De Casa, chief analyst at ActivTrades, said technical factors were curbing strength in gold, while “the U.S. dollar’s recovery is making it more complicated.”

“We have two important support levels at $1,765 and $1,750, while a clear surpass of $1,800 would open up space for bullion.”

The dollar index rose 0.5% as investors weighed chances that U.S. interest rates will be forced higher by a roaring U.S. economic recovery. An expensive dollar makes gold less attractive for other currency holders.

The U.S. central bank wants to keep monetary policy loose for the foreseeable future, but the economic recovery gaining pace has fanned speculation of a pull-back in support sooner than expected.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

Investors are now awaiting U.S. services data due on Wednesday and April payrolls data on Friday for further clues on the U.S. economy’s health.

Spot gold may test resistance at $1,802 per ounce, a break of which could lead to a gain to $1,816, according to Reuters technical analyst Wang Tao.

Elsewhere autocatalyst metal palladium was up 0.7% at $2,991 per ounce after scaling an all-time high of $3,007.73 on Friday.

Silver was down 0.2% at $26.89, after hitting its highest since March 1 on Monday, while platinum rose 0.4% at $1,235.50.

The U.S. dollar extended gains on Tuesday, partially unwinding a month long decline as investors weighed chances that interest rates will be forced higher by a roaring U.S. economic recovery and awaited upcoming data and policy speeches for clues.

Tuesday’s bounce nearly reversed losses sustained on Monday after a disappointing U.S. manufacturing survey report, leaving it 1% above a one-month low struck last week.

Though April’s headline survey numbers were lower than March, but the U.S. recovery remained firmly on track with price pressures rising, while the Federal Reserve appeared to be in no hurry to tighten.

Financial conditions are nowhere near the level where the Fed would consider pulling back its support, New York Fed Bank President John Williams said on Monday, despite the economy being set to grow at the fastest rate in decades this year as it rebounds from the crisis caused by the coronavirus pandemic.

Commerzbank strategists said U.S. data due for durable goods orders and non-farm payrolls will provide further evidence of the economic recovery.

“However, as the market expectations are a bit too optimistic according to our experts it might put pressure on the dollar despite principally positive results,” they said.

The greenback advanced 0.6% versus the Antipodean currencies and 0.3% against the yen, euro and pound in trade thinned by holidays in China and Japan.

The dollar index which measures the dollar’s value against a basket of major rivals climbed 0.4% to 91.34, just shy of a near two-week high.

Elsewhere central bank meetings are in focus. The Australian dollar weakened as the country’s central bank sharply upgraded forecasts for the local economy yet still predicted no tightening in its super-loose policy until at least 2024.

Sterling dipped marginally to $1.3870 ahead of a Bank of England meeting on Thursday. Analysts reckon the bank might announce a slowdown in its bond buying program as vaccinations have bolstered Britain’s economy.

Elsewhere cryptocurrency ether powered to another record peak, this time nearing $3,500 as speculators drive white-hot crypto markets higher. It last sat at $3,313.

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