Gold prices edged higher for a third straight day early Wednesday, pushing the precious metal further above a one-week peak and toward a five-week high, as a rise in bond yields was overshadowed by weakness in the U.S. dollar.
However, some experts warn that the precious metal is vulnerable to sharp pullbacks, amid a period of recently listless trade, leading into the presidential elections in the U.S. set for Nov. 3, and as bond yields gain more altitude.
Chintan Karnani, chief market analyst at Insignia Consultants, says that a rise in Treasury prices, a firmer dollar or a selloff in industrial metals, all could ignite a sharp move in bullion and points to a number of technical levels that traders need to watch.
“What gold needs to do to rise further… gold has to trade over $1930-$1935 zone to rise to $1960,” the analyst said. “Key price is $1930… if gold does not break $1935 by tomorrow then get ready for a move back to $1880,” he cautioned.
Early Wednesday the 10-year Treasury note yield was up 2.4 basis points to around 0.81%. But gold investors appeared to be focusing on a 0.4% move lower in the dollar, as gauged by the ICE U.S. Dollar Index.
Rising yields can undercut appetite for gold, which doesn’t bear a coupon, while a weakening dollar can stoke demand in dollar-pegged precious metals among buyers using alternative currencies.
December gold was up $12.10, or 0.6%, at $1,927.50 an ounce, following a gain of 0.2% on Wednesday, bringing the precious metal to around its highest levels since at least Oct. 12. At its intrasession peak on Wednesday, it briefly traded near its highest level since Sept. 18, FactSet data show.
Silver futures for December delivery picked up 27 cents, or 1.1%, adding to a similar gain from the previous session that was leading it to trade at around $25.33 an ounce.
Commodity investors have trained their attention on the presidential race between President Donald Trump and Democratic challenger Joe Biden, rising cases of the novel coronavirus throughout the globe and protracted negotiations among U.S. lawmakers centered on providing fresh aid to American businesses and workers economically harmed by lockdowns and distancing measures instituted to curb the viral spread.