Gold prices hit their highest level in more than a month on Thursday as both the dollar and US yields dropped, while the Federal Reserve’s reiteration of its dovish policy stance also lifted bullion’s appeal.
Spot gold rose 1.0% to $1,754.71/oz by noon EST, the first time it’s trading above the $1,700/oz level since late February. US gold futures gained 0.8% to reach $1,755.40/oz.
Risk sentiment was broadly improved after minutes from the Fed’s March meeting showed no signs of scaling back its massive bond-buying program. This lifted both US and European equities and pushed the dollar down to more than a two-week low.
The persistently accommodative stance on monetary policy from Fed Chair Jerome Powell has also helped cool a rise in Treasury yields, which harmed non-interest bearing gold.
“The dollar and US yields are coming off and that’s the key catalyst right now… a pretty unimpressive jobs number is also helping push gold higher,” Bob Haberkorn, senior market strategist, RJO Futures, told Reuters.
“And the fact that we’re above $1,750, which is a key technical level, shows that gold has some legs to continue higher,” Haberkorn said.
“Gold has tracked long-dated real Treasury yields in recent months,” analysts at Capital Economics wrote in a note. “We think that long-dated real yields will rise a bit further, putting the gold price under more pressure.”
Bullion has dropped about 8% this year amid optimism over the global economic recovery, and as rising bond yields dampened the appeal of the precious metal.
Holdings in gold-backed exchange-traded funds, one of the main pillars behind gold prices hitting a record in 2020, continue to decline, signaling waning investor interest.
(With files from Bloomberg and Reuters)