Weakening Dollar Boosts Gold Prices

Published March 1st, 2021 - 03:00 GMT
Weakening Dollar Boosts Gold Prices
The dollar was down on Monday from the one-week high hit during the previous session. (Shutterstock)
Highlights
Gold futures jumped 1.01% to $1,746.25 by 11:30 PM ET (4:30 AM GMT) after hitting its lowest since June 2020 on Friday.

Gold was up on Monday morning in Asia, recovering from an eight-month low reached during the previous session, with a weakening dollar boosting the yellow metal’s appeal.

Gold futures jumped 1.01% to $1,746.25 by 11:30 PM ET (4:30 AM GMT) after hitting its lowest since June 2020 on Friday. The dollar was down on Monday from the one-week high hit during the previous session.

However, bullion recorded its worst monthly fall since November 2016 in February, thanks to rising U.S. Treasury yields increasing the opportunity cost of holding gold. The ensuing bond market selloff saw government bond yields in the U.S., Germany and Australia ending February with their biggest monthly rises in years and central banks globally scrambling to calm the panic. U.S. Treasury yields soared to their highest level in a year as bets on accelerating inflation raised concerns that there could be a pullback in monetary policy support.

“Bond markets continue to signal the end of the interest rate reduction cycle … if the inflationary pressures reflected by sharply lower bond prices are evident by mid-year, central banks will have little choice but to wind back their current support. A falling gold price shows that the main concerns are about higher rates, over-riding any safe-haven attraction to the yellow metal,” CMC Markets chief market strategist Michael McCarthy told Bloomberg.

In other central bank news, the U.S. Federal Reserve will release its Beige Book on Wednesday, and Fed Chairman Jerome Powell will discuss the economy at a Wall Street Journal event scheduled for Thursday.

Investors decreased bullish positions in COMEX gold and silver contracts in the week to Feb. 23, the U.S. Commodity Futures Trading Commission said on Friday. In Asia, demand for physical gold in India grew during the past week as bullion prices remained near eight-month low prices, while there was continued steady interest for both gold and silver in Singapore.

Other precious metals also gained, with silver gaining 0.3%, palladium up 1% and platinum rising 1.1%.

Meanwhile, over the weekend, the U.S. also approved its third COVID-19 vaccine, the single-dose candidate developed by Johnson&Johnson (NYSE:JNJ), and the U.S. House of Representatives passed the $1.9 trillion stimulus package proposed by President Joe Biden.


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