Commodity Market: Gold plummets to a fresh nine-month low as Fed Chair Powell’s remarks on bond yields bolster US Dollar

Spot Gold extended losses from the previous two trading days on Friday, while hitting a fresh nine-month low, following some disappointing remarks on rising bond yields by Federal Reserve Chair Jerome Powell, which further bolstered bond yields and the US Dollar.

The precious metal also looked set to register its third consecutive week of losses.

The Fed Chair said yesterday that despite the recent increase in bond yields was “notable”, the move could not be considered as a “disorderly” one. The yield on benchmark 10-year US government bonds exceeded 1.5% following Powell’s remarks, while the US Dollar extended gains and hit highs unseen since late November.

Rising bond yields lead to higher opportunity cost of holding non-yielding Gold.

Additionally, the latest data by the World Gold Council showed that the amount of gold held by exchange traded funds had dropped by 84.7 tonnes worth $4.6 billion in February.

As of 10:02 GMT on Friday Spot Gold was edging down 0.17% to trade at $1,694.82 per troy ounce, after earlier touching an intraday low of $1,687.29 per troy ounce, or its weakest price level since June 8th 2020 ($1,677.51 per troy ounce). The commodity has retreated 2.39% so far in March, following another 6.14% drop in February.

Meanwhile, Gold futures for delivery in April were retreating 0.57% on the day to trade at $1,691.05 per troy ounce, while Silver futures for delivery in May were down 0.81% to trade at $25.255 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 up 0.39% to 91.99 on Friday, which has been its strongest level since November 30th 2020 (92.05).

In terms of macroeconomic data, today Gold traders will be paying attention to the February report on US Non-Farm Payrolls, Unemployment Rate and Average Hourly Earnings due out at 13:30 GMT.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of March 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 March 16th-17th, or unchanged compared to March 4th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,703.81
R1 – $1,717.10
R2 – $1,736.56
R3 – $1,749.84
R4 – $1,763.13

S1 – $1,684.35
S2 – $1,671.07
S3 – $1,651.61
S4 – $1,632.15

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