Commodity Market: Gold hits a fresh all-time high on broadly weaker dollar, prospects of more stimulus

Spot Gold continued to rally and registered a fresh record high during early European trade on Wednesday, supported by US Dollar’s weakness and prospects of additional stimulus measures to stimulate economic recovery.

The US Dollar lost ground against major peers as the stalemate over US fiscal policy brought forth a speculation that the Federal Reserve might have to bolster monetary stimulus to support economy, which drove US bond yields lower and reduced the opportunity cost of holding Gold.

The yield on US 10-year bonds dropped to 0.512% on August 4th, or the lowest level in at least 13 years, while the yield on US 5-year Treasuries plunged to a record low of 0.190%.

“The drop in the dollar and nominal yields, as speculation remains rife about global growth and any U.S. fiscal package, is what fundamentally drove gold prices higher,” IG Markets analyst Kyle Rodda said.

“The outlook remains very strong for gold. Interestingly, we’ve seen traders reduce their long exposure to gold throughout this recent rally, suggesting new buyers could still come back into the market to push prices higher.”

Rising new COVID-19 infections across the United States have prompted a number of states to postpone or roll back their reopening plans.

The latest data by the Center for Systems Science and Engineering at Johns Hopkins University showed total confirmed COVID-19 cases had already surpassed 18.544 million worldwide, with US cases now exceeding 4.771 million. Global death toll has surpassed 700,000, with more than 156,000 deaths reported in the United States alone.

As of 9:20 GMT on Wednesday Spot Gold was gaining 0.80% to trade at $2,035.55 per troy ounce, after earlier touching an intraday high of $2,040.13, a fresh all-time high. The precious metal advanced 10.95% in July, while marking its fourth consecutive month of gains and also the best monthly performance since January 2012. It has risen 3.00% so far this week.

Meanwhile, Gold futures for delivery in October were gaining 1.51% on the day to trade at $2,038.75 per troy ounce, while Silver futures for delivery in September were up 2.49% to trade at $26.677 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging down 0.25% on Wednesday to 93.03, while hovering just above last Friday’s 26 1/2-month low.

Today Gold traders will be paying attention to the monthly report on US services sector conditions by the Institute for Supply Management at 14:00 GMT. It may show activity in the US sector of services expanded at a slower rate in July.

Additionally, a report by Automatic Data Processing Inc at 12:15 GMT may show employers in the US non-farm private sector hired 1.500 million workers in July.

Meanwhile, near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of August 5th, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on September 15th-16th, or unchanged compared to August 4th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $2,002.10
R1 – $2,037.34
R2 – $2,055.27
R3 – $2,090.52
R4 – $2,125.76

S1 – $1,984.17
S2 – $1,948.92
S3 – $1,930.99
S4 – $1,913.06

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