- Gold reached its highest level in more than a month at the top of $ 1,750 in recent trading.
- Dovish comments from Fed Chairman Powell have been weighing on yields, the dollar and support for gold.
Spot Gold Prices (XAU / USD) they hit their highest levels in more than a month, just above the March 18 high of $ 1,755 in recent trade and continue to hover above $ 1,750. The pair has been at the forefront for most of Thursday’s session, rising from the levels touched in the Asian session at $ 1,730. That means gold is trading around 1.1% or just under $ 20 on the day. On the upside, short-term bulls will look for a test of the 50-day moving average at $ 1,764.
Performance of the day
The main driver of gold price action on Thursday has been the US government bond markets. Yields are slightly lower, with the 10-year yield falling around 2 basis points below 1.64%. Following dovish comments from Fed Chairman Jerome Powell, there may be further declines in US government bond yields, which would be a positive for gold. Although bonds have not reacted much to Powell’s comments yet, the US dollar has taken a hit and the DXY fell back to the 92.00 level. The weaker US dollar is also a support factor for gold.
This is Fed Chairman Powell speaking
Fed Chairman Jerome Powell has been speaking on an IMF panel for the last hour or so. Powell said the outlook for the US economy has improved as a result of fiscal support and vaccines. However, Powell noted that the slower pace of global vaccines and the recent rise in Covid-19 infections in the US are risks to the recent progress that has been made and that he expects an increase in cases. Covid-19 slowdown economic recovery. Powell noted that while fiscal and monetary support has helped the US economy avoid many scars, the economy still needs support, before adding that millions of people will have a hard time getting back into the workforce. Referring to the recent strong employment report, Powell said the Fed would want to see a series of months like the March employment report to see progress towards its targets, before noting that the unemployment rate in the economy’s bottom quartile it’s still 20%.
In short, Powell’s observations on the economy were moderate; he acknowledged, but appeared to downplay recent robust data and the recent improvement in the economic outlook for the economy, while being eager to emphasize that the economy remains a long way from the Fed’s targets (as expected). Moving on to Powell’s comments on inflation; He noted that a one-time increase in inflation is different from a persistent increase in inflation, which he defined as inflation that increases “year after year after year.” In that regard, Powell reiterated that the upward price pressures later this year are highly likely to be temporary, in other words, saying that the Fed will not worry about the pick-up in inflation and will stand firm when it comes to favorable monetary conditions. These comments, while nothing new, also seem to have contributed to the docile tone of Powell’s comments.