Spot gold bottomed out on Friday and edged higher 0.48 per cent to $1784.25 an ounce, hitting a seven-month low of 1760.81 before recovering as the dollar fell, although gold has fallen more than 6 per cent so far in 2021. So far this week, gold prices have fallen 2.19%, the biggest weekly decline since the week of January 8, as rising U. S. bond yields put pressure on gold prices and the gradual remission of the epidemic put further pressure on gold prices. However, the Fed report and New York Fed Chairman Williams reiterated the provision of "strong support" for the US economy to support gold prices. In addition, the mixed economic data also give gold a respite.
The dollar index edged down 0.12% to 90.33.
Us bond yields posted their biggest rise in six weeks
The yield on 10-year US Treasuries surged 10.6 per cent to 1.336 per cent this week, the biggest weekly rise in six weeks and an one-year high as the economy recovered from the novel coronavirus epidemic with the help of massive fiscal and monetary stimulus. Fears of looming inflation weighed on bond prices.
The House of Representatives plans to vote on President Joe Biden's stimulus package on February 26th. Democrats are trying to pass the bill in less than four weeks. Senate Majority Leader Schumer says he expects the White House to sign the stimulus bill by March 14, when the increased federal unemployment benefits for millions of Americans expire.
Gold is at a disadvantage because of rising interest rates on global government bonds. Analysts said expectations that the economy would improve in the coming months and novel coronavirus vaccination efforts had dented investor enthusiasm for gold and higher yields had reduced unyielding demand for gold.
Raffi Boyadjian, a senior investment analyst at XM, wrote that gold prices were hurt by higher returns from equally safe-haven bonds, which undermined the attractiveness of unyielding gold.
James Hatzigiannis, chief market strategist at Ploutus Capital Advisors, said the only way for gold to break through the $1800 psychological barrier was to calm bond yields and confirm that the epidemic was entering its final stop.
Peter Thomas, senior vice president of Zaner Group, said that as "interest rates rise and inflation expectations hit highs, we are seeing a lot of profit-taking from gold and people are moving from gold to industrial metals such as copper. This is a perfect storm. "
BofA strategists say the rapid rise in bond yields over the past week has panicked some investors, but if yields rise by nearly half a percentage point, stocks could face more resistance.
Gold prices were mainly affected by the rise in US bond yields this week, falling 2.19% in the weekly line and falling six times in a row on the daily line, closing up 0.48% only on Friday, while the trend of US bonds remained strong.
The global growth rate of novel coronavirus infection cases slowed to the slowest since October.
According to Johns Hopkins University, the number of new confirmed cases of novel coronavirus worldwide in the week to February 14 was the lowest since October, at 2.7 million. This is equivalent to a 2.5% increase in cumulative confirmed cases over the previous week, the smallest increase since the outbreak began and less than half the increase of a month ago.
The number of new deaths has also begun to decline, but not very significantly. The average number of new deaths in a single day over the past five days is less than 10000, down from a peak of more than 18000 in a single day in mid-January.
There are two factors that may help to reduce the number of new confirmed cases and deaths in the coming months. The first is the arrival of spring in the northern hemisphere, because novel coronavirus usually tends to be less active in warmer weather. The other is that the largest vaccination in history has just begun. So far, more than 186 million doses of the vaccine have been vaccinated in 82 countries and regions, and vaccination will be launched in more areas in the coming weeks.
As the number of new outbreaks decreases, the panic in the market will gradually subside, which is a disadvantage for gold prices.
This week's economic data are mixed.
Us retail sales rose at their fastest pace in seven months in January, reflecting a rebound in household demand after a weak performance in the fourth quarter, thanks to factors such as the government's bailout cheques to deal with the impact of the epidemic.
Overall retail sales rose 5.3% month-on-month, with significant increases in all major categories, according to data released by the commerce department on Wednesday. It fell by 1% in December. The median forecast by analysts is 1.1% growth.
Us manufacturing output grew faster than expected in January and rose for the fourth month in a row, indicating that the industry continues to recover from the disruption caused by the novel coronavirus epidemic.
Manufacturing output rose 1 per cent month-on-month, compared with 0.9 per cent in December, according to data released by the federal reserve on Wednesday. Economists expect an increase of 0.7%. Overall industrial output, including mining and utilities, rose 0.9 per cent month-on-month in January and was revised to 1.3 per cent in December.
But there was an unexpected increase in initial claims for unemployment benefits in the US last week, announced on Thursday, raising the likelihood that the employment report could underperform for the second month in a row, despite a decline in the number of novel coronavirus infections.
In the week ended 13 February, the number of first-time claims for benefits increased by 13000 to 861000 on a seasonally adjusted basis. The previous week's figures were revised to 55000 more applications than previously reported.
As of the end of January, at least 18.3 million Americans were receiving unemployment benefits. Unless Congress approves the Biden administration's spending plan, the government's benefits for millions of people will expire in mid-March.
"although the economic rebound in the first quarter appears to be stronger than expected, this does not seem to be the case in the job market," said Conrad DeQuadros, a senior economic adviser at Brean Capital in New York.
The US Markit manufacturing PMI for February, released on Friday, was also weaker than expected at 58.5 and 59.2.
The mixed data show that there are still some uncertainties in the prospects for the recovery of the US economy, which is why gold prices had a respite on Thursday and Friday.
The Federal Reserve said it would continue to provide "strong support" to the US economy, while Williams said it was not worried about excessive stimulus.
In its twice-yearly congressional report on Friday, the Fed said its actions will continue to support the economy as the country fights a pandemic.
"Monetary policy will continue to provide strong support to the economy until the economy fully recovers," the Fed said. The Fed released the report on its website. Federal Reserve Chairman Colin Powell will appear before the U.S. Senate Banking Committee next Tuesday (February 23) and the House Financial Services Committee on Wednesday (February 24).
The Fed points out that unemployment during the pandemic disproportionately affected low-income workers, workers without college degrees, people of color and mothers in the United States.
Americans even managed to save money during the crisis, pushing the total savings rate to more than 13% in the fourth quarter of 2020, almost double the level of the previous year. This is supported by government stimulus measures. But policymakers say such a high savings rate doesn't tell the whole story.
"these aggregate figures mask important differences between households," the Fed said in the report. The financial situation of many low-income families, especially those whose incomes have decreased as a result of the pandemic and recession, is very tight.
Meanwhile, the chairman of the New York Fed said on Friday that the rise in Treasury yields was a sign of optimism about the economic recovery, suggesting that the Fed may have no intention of taking steps to stop the shift.
"We are seeing signs of rising inflation expectations, returning to levels that I think are closer to our long-term target of 2 per cent, as well as signs of a slight rise in real yields in the long run, reflecting increased optimism about the economy," John Williams, president of the New York Fed, said in an interview with the CNBC. "so it's not a problem for me. It mainly reflects the market feeling that the economic outlook will be better. "
He believes that the economy has not yet climbed out of the abyss. "at present, the economy is still a long way from maximising employment and we are still a long way from achieving the 2 per cent inflation target," he said. "so I am not worried that the current stimulus or fiscal support will be excessive."
The Fed's report and the statement of the Fed's number three, Williams, are consistent with the Fed's previous statement, and the market expects the Fed to maintain its current super-loose monetary policy for a long time, which is a potential positive for gold's future rally.
Yellen continues to push for a $1.9 trillion stimulus package
On Thursday, U.S. Treasury Secretary Yellen again pushed Congress to approve the $1.9 trillion stimulus package. "there is too much pain in the economy," she said. "
Yellen said in an interview that she was not too worried about inflation, which "has been at a very low level for the past decade." She said that if Congress does not act, the greater risk is to leave "scars" on the economy.
"We hope to see legislative progress in this program in the coming weeks," Yellen said. "
Critics have said the economy is showing signs of strong growth, so there is no need for a nearly $2 trillion stimulus package. But Ms Yellen said the unemployment rate was close to 10 per cent "if measured correctly".
"I think the cost of doing too little is much higher than the cost of doing great things," she said. We believe that in the long run, the benefits will far exceed the costs. " There is too much pain in the economy. "I think these stimulus checks will really ease the pressure and help us kick-start the economy."
Naeem Aslam, chief market analyst at AvaTrade, pointed out that recent comments by US Treasury Secretary Yellen also provided support for gold prices. Mr Aslam said Ms Yellen's comments made the market look forward to the passage of the rescue package, while a larger stimulus package would boost gold prices by creating more debt and devaluing the dollar. We expect more volatility next week as several Fed officials are expected to speak, which will make investors and traders talk more. 'There is no doubt that gold has been oversold and a rebound is coming,'he said.
