Gold Prices Consolidate Weekly Gains, Dollar Vulnerability Limits Selling

An improved tone surrounding risk appetite pulled gold from 2-week highs, but dollar weakness has had an important impact in limiting any selling pressure on prices.

Overall risk conditions continued to stabilise during Thursday’s New York session which curbed further potential buying support for gold and prices dipped to test support below the $1,250 per ounce level.

US equities posted modest gains into the close and Treasuries also pared gains, although there was little in the way of upward pressure on yields as underlying caution prevailed.

Global bond yields edged higher during the European session on Friday and US 10-year yields edged higher to near 2.25% which curbed potential gold support.

The dollar, however, was generally on the defensive against European currencies as EUR/USD found support near 1.1100 and dollar vulnerability limited selling pressure on gold.

Overall, there was consolidation just above $1,250 ahead of the US open and there were no significant US data releases.

The dollar maintained a soft tone as EUR/USD advanced to fresh 6-month highs just below 1.1200 early in US trading which underpinned gold prices.

There were also comments from St Louis Fed President Bullard that the data has been weak since the last FOMC meeting. According to Bullard, the dip in long-term yields and inflation expectations after the March meeting suggests that the Fed may be moving too fast in raising rates.

USD/JPY dipped lower following Bullard’s comments which provided additional support to gold as it tested the $1,255 area. Nevertheless, there looks to be little scope for further near-term gold gains.

The latest COT data will be important for gold sentiment, especially after the sharp drop in long positions recorded last week. An aggressive re-building of longs would increase the risk that prices will quickly hit fresh selling pressure if risk conditions remain more favourable.

Global risk appetite will inevitably remain an important feature and underlying tensions may ease slightly while President Trump is overseas. There will, however, still be a high degree of caution, especially with former FBI Director Comey due to testify to Congress next week.

Gold Prices 4-Hour Chart

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Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.