Gold crept upward slightly over the weekend in its path to a second quarterly rise as the dollar fell slightly on lukewarm U.S. financial data.
U.S. consumer spending rose less than forecasted in January and earnings increased decently in February, alleviating concerns that slowing worldwide growth was impacting the U.S. economy.
The dollar fell against other currencies but pared losses against the pound sterling as Theresa May’s Brexit deal failed to pass.
U.S. stocks remained stable on Friday after a report that the U.S. and China had made progress in all areas in trade talks, further chipping away at investors’ appetite for safe-haven gold. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin were in Beijing for the latest round of negotiations and though in the long-term, commodities are set to benefit from trade talk progress, it did help lift markets, and by extension, the U.S. dollar.
Worldwide bond yields fell lower as worries of slowing development aroused consideration that central banks would be required to adjust policies. Lower yields benefit gold as it minimizes the chance cost of holding non-yielding bullion.
Strong dollar weighs on gold prices
Gold found it incredibly tough to remain above the $1,300 level. It is safe to conclude that a lot of short-term traders would have entered the marketplace when gold price dropped from its high, with an expectation that a rally would soon ensue, however, the marketplace failed to move significantly. A lot of the short-term futures traders chose to pull the plug on their positions instead.
This combined with a strong US dollar, and global investors still chasing after the yield in the United States resulted in the sharp correction.
The view is that the present correction is an excellent level for balancing or developing fresh longs. It is vital to recognize that earlier elements like a recurrent dovish attitude by the Fed, slowing worldwide economy, the slew of economic development downgrades, appearance of a negative yield curve in U.S. bond market and untidy Brexit led gold to rally temporarily.