The “safe-haven” yellow metal closed the week bearish by 0.73%. Although it held on to the $1,800 trading zone, Gold still posted its first weekly loss in 5 weeks as it remained uncorrelated from prospects of steady inflation in the United States.
Reason for the decline
Global shares posted a significant rally for the week as investors’ appetite increased. This led to less appeal for the safe-haven asset and investor interest moved to other markets like the U.S stock exchange and the cryptocurrency market. The Dow Jones gained 1.08%, S&P 500 gained 1.96% and the NASDAQ gained 2.84% WoW. The cryptocurrency market also saw a rally as Bitcoin, after breaking below $30,000, recovered quickly to currently stand at $34,200, as of the time of writing this report.
Gold is also having an uncertain week as investors await the central bank’s policy meeting popularly known as the FOMC (Federal Open Market Committee) meeting on July 27 and 28. This is where the U.S Federal Reserve (Fed) officials review economic and financial conditions, determine the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth. The U.S Fed’s measure of inflation is the Personal Consumption Expenditure Index (PCE) which grew by 0.28% to a multi-year high of 3.39% in May.
The U.S has indicated that it expects two hikes before 2023 that will bring interest rates within a range of 0.5% to 0.75% from a current pandemic-era super-low of zero to 0.25%. It has not set a timetable for the tapering or complete freeze of the $120 billion in bonds and other assets it has been buying since March 2020 to support the economy through the Covid crisis.
Gold so far in 2021
Since January, Gold has been on a roller coaster ride that started to spiral down as far back as August 2020. The yellow metal declined from a record of approximately $2,060 and consolidated for a few months before declining on news of the first breakthroughs in Covid-19 vaccine efficiencies. In March, gold traded a near 11-month bottom at under $1,674.
So far, the yellow metal is still down 7.25% Year-to-Date (YtD). After the decline to below $1,700, Gold quick bounced back to $1,905 in May but saw a new round of short selling that took it back to below $1,800 levels before talks of monetary tightening by the Federal Reserve pushed it even lower to mid-$1,700 levels.
What they are saying
Head of research for the Americas at broker OANDA, Ed Moya stated, “Gold is softer as risk appetite runs wild, with the S&P 500 index making a fresh intraday record high following robust earnings and as Treasury yields appear poised to close near this week’s high.”
For the week, gold declined by 0.73%, after gaining 2.6% over four previous weeks. As investors’ risk appetite grows and the global economy continues to recover from the pandemic, Gold may very well continue is decline downwards. The yellow metal closed the week at $1,801.90.