Gold surges near 3-week high on dollar,Treasury yields dip

By Onome Amuge.

Gold prices rose to a near three-week high on Tuesday, underpinned by a softened U,S dollar and weakened Treasury yields as markets awaited a slew of key U.S. economic readings  accountable for further policy action later this week.

Market data showed that the yellow metal saw some safe haven bids as investors grew uncertain over how U.S. data releases will play out in the week, given that they are likely to influence the movement of interest rates.

This is seen to have helped the  gold recover further from recent five-month lows, while spot prices also pushed further above the key $1,900 an ounce level.

Following the development, Spot gold was up 0.3 per cent to $1,925.51 an ounce, while gold futures expiring in December gained 0.3 per cent to $1,953.25 an ounce.

Analysts observed that the gold price has the majority of catalysts needed for the further upside as the US Dollar Index (DXY) struggles to climb above 104.00 amid some profit taking, while 10-year US bond yields drop to near 4.18 per cent off over 20-year highs.

Elsewhere, hopes of more stimulus from China via fiscal, as well as monetary policy, keep the gold buyers hopeful.

Meanwhile, markets are now focused squarely on a barrage of U.S. economic readings this week, starting with consumer confidence data due later in the day.

As it stands, gold price looks confident above $1,920.00 as value-buying kicked in on hopes that the interest-rate peak is near. The precious metal also climbs above the 20- and 200-day Exponential Moving Average (EMA), which indicates a solid recovery attempt. In spite of this revival move, the yellow metal has to pass through some more filters for a sustained reversal, analysts said.

Justin Low, currency analyst at foreign exchange market  portal forexlive, noted that August has been a poor month for gold but the technical picture shows that it could’ve been a whole lot worse.

“Gold is now trading back to around $1,923 but was close to around $1,885 at the lows this month – its lowest levels since March,” he said.

Low believes there is some room for price action to roam and advised investors to keep a close eye on the bond market, stressing that the developments there and how yields are trending are still a key driver for gold price movement currently.

“Buyers can take in comfort and hold out some hope that yields are off the highs. But if the selling pressure in bonds pick up again, that will be major bane for gold prices especially if traders are not confident that major central banks will be cutting rates any time soon,” he added.