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Gold quotes finally show a positive trend, rising by 1% on Monday. Last week was a losing week for the precious metal: the quotes sank in price by more than 2.5%. In general, the entire previous month was fatal for gold. The decline in quotes was the strongest in the last four years, namely since November 2016. Then gold prices sank by more than 7%, and over the past month, the precious metal has lost a significant 6.6%. Gold has been under strong pressure since the beginning of autumn 2020.
April gold futures showed a positive shift on the Comex on Monday. The price rose by 1.13%, reaching $1,748.25 per troy ounce. May silver futures also rose 1.96%, to $26.957 an ounce. At the time of writing this review, gold quotes against the US dollar reached $1,749.
The weakness of gold in February was due to the growth of the US dollar and the yield of US government bonds. The more expensive the dollar, the less affordable gold becomes when buying in another currency. And since the dollar and government bond yields are directly related, the sharp rise in yields weakens the demand for the precious metal. Let me remind you that the yield on 10-year US Treasuries last Thursday reached an intraday high of about 1.54%, compared with 1.34% last Friday. The yield on the 5-year bond rose the most since 2010. As soon as the bond yield exceeded 1.55%, the price of precious metal sank to local lows.
Apparently, the increase in rates was largely due to investors' hopes for an early economic recovery, which was reflected in the growth of prices for real estate, commodities, and some other metals. Federal Reserve Chairman Jerome Powell said on Sunday that the positive performance of some sectors of the economy is the result of fiscal and monetary stimulus. Powell assured the public that the current soft monetary policy of the Fed will remain unchanged in the medium term. And since the regulator primarily aims to increase the level of employment, and not to prevent the growth of inflation, the current policy course remains favorable for gold. Taking this into account, Credit Suisse experts predict a further increase in the price of the precious metal this year to $2,200.
At the same time, Citibank analysts lowered their previous forecast for gold for the next 12 months from $2,100 to $1,950. The bank's experts believe that the bitcoin price rally has greatly affected the gold market: many market participants have closed positions in precious metals and invested in cryptocurrencies. As a result, in 7 days, investments in the largest ETFs investing in gold decreased by 1.4%.
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