Gold futures closed lower on Tuesday (Jan. 18), due to the appreciation of the dollar and the rise in U.S. government bond yields.
- The gold contract was down $4.1, or 0.23%, at $1,812.4 per ounce.
- Silver futures were up 57.4 cents, or 2.5%, at $23.492 an ounce.
- The platinum contract was up $14.9, or 1.54%, at $979.5 per ounce.
- The palladium futures were up $26.40, or 1.4%, at $1,904.60 an ounce.
Looking at the gold chart over the period of one year, one can see that since the low in early March 2021, the gold price has been able to move up piece by piece and had higher lows.
This could be a positive trend for a possible rally soon.
The yield on the 10-year U.S. Treasury bond rose to 1.87%, its highest level in two years, while the dollar index against the other six major currencies in a basket of currencies rose 0.49% to 95.7296.
Meanwhile, weak U.S. economic data helped stem the decline in gold markets. The National Association of Home Builders (NAHB) of the United States announced that the Homebuilder Confidence Index fell one point to 83 in January.
The Federal Reserve Bank of New York announced that its Empire State Manufacturing Index fell to -0.7 in January from 31.9 in December. This signals that manufacturing growth is beginning to slow after 18 months of continuous expansion.
Taper rumors on the part of the Fed are currently making market participants wonder whether this will really happen. The last attempt by the Fed to taper in 2019 led to real sell-offs on the markets, whereupon the Fed expanded its QE program again. Hard to believe that this will be the case now, not since it is known that leading politicians are heavily invested in the stock market. Also, a high increase in interest rates is not conceivable, because, with interest rate increases, the high debt mountain of the government must be repaid with high-interest rates. In addition, this increases the mortgages, which could weigh heavily on the purchasing power of the population.
In both directions, gold bulls see fuel for rising gold prices. If the monetary policy remains unchanged, real interest rates will continue to be negative, which is very bullish for gold. If the QE program ends, this could lead to panic in the markets, where many will seek safety in gold as already seen in early 2019.
The Spot Market is Open
Wednesday, January 19, 2022