Gold futures ended higher on Monday, but failed to reclaim the $1,800-an-ounce threshold as the U.S. dollar kicked off the week with a firm tone.
Strength in the dollar is likely the main reason gold fell to touch the support zone of $1,790 an ounce, said Carlo Alberto de Case, market analyst at Kinesis.
On the other hand, fears over the spread of the COVID-19 delta variant, and the possibility that Federal Reserve will again postpone the start of the tapering are the “main supportive drivers for the gold price,” he told MarketWatch.
“Overall the scenario is uncertainty and mostly driven by central banks and by the greenback movements,” he said.
Gold for December delivery rose $2.30, or 0.1%, to settle at $1,794.40 an ounce on Comex, with prices trading as low as $1,784.40 and as high as $1,800.20 during the session. December silver fell 10 cents, or 0.4%, to nearly $23.80 an ounce, extending Friday’s more than 1% loss.
“Policy makers have seemingly been keen to ensure the [economic] data doesn’t distract from the central bank’s intentions to taper this year, understanding the importance of effective communication when approaching major policy shifts,” said Craig Erlam, senior market analyst at Oanda, in a market update.
“That’s held gold back even as the data has softened,” he said. “There’s plenty more to come this week, but [gold] may trade cautiously still,” ahead of next week’s Fed policy meeting.
For now, traders appeared to be positioning themselves in preparation for the August U.S. Consumer Price Index, or CPI, reading due Tuesday, said Carsten Fritsch, analyst at Commerzbank, in a note.
Fritsch expects inflation to come in near July levels, and therefore “likely to provide arguments for the Fed to begin withdrawing its bond purchases before the year is out.”
A rise in Treasury yields could be a headwind for gold, as it would raise the opportunity cost of holding nonyielding assets. A stronger dollar is also a negative for commodities priced in the unit, making them more expensive to users of other currencies.
The ICE U.S. Dollar Index a measure of the currency against a basket of six major rivals, rose 0.1%. Treasury yields weakened in Monday dealings, after climbing on Friday.
But, Fritsch said, Commerzbank economists don’t expect Fed policy makers to make any decisions at next week’s meeting on the fate of the central bank’s asset buying program.
“According to the prevailing market opinion, however, this is very likely to happen at one of the two subsequent meetings,” he said. “The inflation figures should therefore have no major impact on the gold price so long as they do not deviate noticeably from expectations.”
Among the other metals traded on Comex Monday, December copper shed 1.9% to $4.37 a pound. October platinum edged up by 0.1% to $957.50 an ounce, while December palladium settled at $2,079.80 an ounce, down 2.2%.