Gold Vaults Above $1,900 First Time In 20 Weeks

(May 25th, 2021 - Barani Krishnan , Investing.com)

Gold hit $1,900 highs on Tuesday for the first time in 20 weeks as retreating U.S. bond yields and the dollar helped the yellow metal reach a pivotal point for longs in the yellow metal hoping to reprise last year’s all-time peaks.

Gold for June delivery on New York’s Comex rose to $1,901.15 before settling at $1,898, up $13.50, or 0.7%, on the day.

Prior to this, the last time gold futures got to $1,900 was on Jan. 9. Between that and Tuesday, gold had raked a near 11-month bottom of under $1,674.

The spot price of gold, reflective of real-time trades in bullion, was at $1,900.02 by 4:20 PM ET (20:20 GMT) after an intraday high at $1,900.28.

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.

Yields tied to the 10-year Treasury note was down 3.4% to 1.55.

The Dollar Index, which pits the greenback against the euro and five other major currencies, was down 0.2% to 89.67.

The 10-year yield spiked to highs at above 1.7% between mid-March and mid-April and the Dollar Index ran up to above 92 amid a flurry of data pointing to heightened inflation as the U.S. economy sprinted from the clutches of the Covid-19.

The Fed acknowledges the price pressures arising from bottlenecks in U.S. supply chains struggling to cope with demand in an economy reopening after months of pandemic-suppression.

But the central bank’s policy-making Federal Open Market Committee, led by Chairman Jerome Powell, insists that these inflationary pressures are “transient” and will fade as the economy makes a full recovery from the pandemic. The FOMC also does not see the immediate need to raise interest rates.

In fact, until two weeks ago, almost every data point from consumer to producer prices as well as industrial production pointed up. Prices of virtually everything, from houses to the lumber that goes into building them, had soared as well, scaring economists into believing that inflation growth in 2021 could be the highest in 35 years. In recent days though, there had been an evident cooling of such trends that pushed yields and the dollar back.

One other reason for gold’s vault into $1,900 territory on Tuesday: a still weak Bitcoin, which was down nearly 4% to below $38,000.

Funds flowed out of gold in droves earlier this year, reaching for Bitcoin which soared beyond $64,000 in April.

“Bitcoin was gold’s kryptonite for a good part of the first four months of (the) year, but environmental and regulatory concerns have put a tentative end over its relentless buying,” said Ed Moya, analyst at online trading platform OANDA.