Gold prices took advantage of a weaker dollar and decline in bond yields on Friday, but there was no move to break above resistance levels as equity markets continued to find willing buyers on dips.
There were no significant market-moving events from President Trump’s press conference on Thursday and US equities maintained a firm underlying tone which curbed potential gold demand on defensive grounds.
Overall bond yields continued to move edged lower, however, and the dollar also drifted weaker which provided a solid foundation for previous metals. Silver broke above the $18.00 per ounce level which also supported gold and prices approached 3-month highs above $1,240 per ounce without being able to break higher.
Selling pressure overall was very subdued with prices holding above $1,235 as market unease remained an important factor.
Risk conditions were more fragile during Friday’s Asian session with equity markets trending weaker. There was a further dip in risk appetite early in the European session as continental markets spiked lower.
US bond futures made headway with the 10-year yield dipping towards the 2.40% level and there were sharp gains for European bond prices. USD/JPY broke below the 113.00 level which also provided net support for gold.
Given that headline inflation rates have moved significantly higher and nominal yields have moved lower, there has been a significant net erosion of yields in real terms. With gold offering no yield, underlying support is eroded when global yields rise. Gold is, however, also an important hedge against inflation and any decline in real yields will tend to boost demand for precious metals.
Favourable global conditions pushed gold to highs close to $1,243 where resistance again held into the US open.
US equity markets recovered from opening losses and USD/JPY also recovered from lows near 112.60 which curbed gold demand with consolidation close to $1,240 as position adjustment dominated US trading.
Overall trends in the dollar and risk appetite will continue to dominate in the short term with the latest COT positioning data also watched closely over the weekend.