What is Leading Gold price towards the North direction?

  • Mar 18, 2019 AEDT
  • Team Kalkine
What is Leading Gold price towards the North direction?

Gold prices inched up, with gold spot surging from the level of 1294.06 (day’s low on 15th March) to the current level of $1306 amid the building uncertainty over the Brexit. The U.K. policy makers turned down the U.K. president Theresa May’s terms of agreement for the Brexit. The likely delay in the Brexit from its deadline of 29th March created a level of uncertainty in the global market and in turn supported the gold prices.

However, the early gains which started on Friday remained capped around the level of $1306.45 (Day’s high on 15th March) amid the improvement in consumer confidence in the betterment of the U.S. economy. The U.S. preliminary UoM consumer sentiment index, which gauges the level of confidence of the sample population in the domestic economy surged and marked a level of 97.8 for March 2019, as compared to the market expectation of 95.5.

However, the presence of high preliminary sentiment could not support the dollar prices, and dollar index (DXY) fell from the level of 96.79 (Day’s high on 15th March) to the current level of 96.42. The fall in dollar prices counterweighted on the consumer sentiment and in turn, supported the gold prices.

The effect of consumer sentiment is better understood by the main UoM sentiment index which is usually published during the month’s end. The data is released twice in a month once as preliminary and once as main and impacts on the dollar in a combination rather than the individual.

Another factor which supported the gold prices was the falling bond yield-to-maturity. The U.S-10-year yield-to-maturity or market discount rate fell from the level of 2.638% (Day’s high on 15th March) to the current level of 2.585%. The fell in bond yield suggested the fear of market participants over the return from different asset classes.

The bond yield denotes the market expectation, a fall in return leads to a drop-in market expectation of return from other assets such as stocks, bonds, etc., and thus, in turn, supports the gold prices as more investors diversify their portfolio or least use gold to hedge against decreasing returns from other asset classes.

The safe-haven gold shows price appreciation in the events of diminishing returns from different asset classes and thus is used to diversify and hedge against any risk of diminishing returns from other assets.

However, gold prices are still prevented from any steep gain as market participants are waiting for the U.S. Federal Reserve meeting outcomes, which is due for 20th March 2019. The FED meeting outcome is expected to throw light on the FED outlook of interest rates for the coming quarter and provide a peek into the global economic perspective through the U.S. Federal Reserve’s lens.

On the data front, the investors are eyeing on FOMC Economic Projections and its statement along with Federal Funds Rate all due on 20th March. The market participants are also eyeing on the U.S. Unemployment Claims which is due on 21st March and is expected to be 226k, any decline below the expected value can exert the pressure on gold prices.


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