Commodity Market: Gold heads for third week of gains amid inflation concerns, US Dollar close to a 12-week trough

Spot Gold was on track to register its third consecutive week of gains amid signs of inflationary pressure, while the US Dollar held close to 12-week lows against major peers and 10-year US bond yields dropped.

“U.S. economic data has given us strong inflation alerts this week, meaning yields and the dollar have fallen, strong supportive factors for gold,” Jeffrey Halley, senior market analyst at OANDA, was quoted as saying by Reuters.

“Additionally, I believe that upward trading momentum has increased for gold as investors now believe that prices have made a structural low.”

The most recent data string revealed a surge in prices in both the United States and the United Kingdom, which fueled inflation concerns and supported Gold as an inflation hedge.

“Further stimulus are seen in different countries and these in the minds of many will lead to inflation moving forward,” Brian Lan, managing director at GoldSilver Central, said.

“On the longer term, we continue to be bullish on gold as the fundamentals that support owning gold have not changed and wouldn’t change for some time, in particular, the low-interest rates environment,” he added.

As of 8:31 GMT on Friday Spot Gold was inching down 0.05% to trade at $1,876.15 per troy ounce, while holding close to Wednesday’s high of $1,890.14, also its strongest price level since January 8th ($1,917.54 per troy ounce).

Gold was on track to register its third straight weekly advance, while being up 1.77%. The precious metal has gained 5.87% so far in May, following another 3.78% surge in April.

Meanwhile, Gold futures for delivery in June were edging down 0.31% on the day to trade at $1,876.05 per troy ounce, while Silver futures for delivery in July were down 1.11% to trade at $27.755 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 0.12% to 89.855 on Friday. The DXY slipped as low as 89.688 on May 19th, which has been its weakest level since February 25th (89.683).

In terms of macroeconomic data, today Gold traders will be expecting the preliminary report on US manufacturing and services sector activity for May by Markit due out at 13:45 GMT as well as the April report on US existing home sales due out at 14:00 GMT.

Additionally, several Federal Reserve officials are scheduled to make speeches.

Near-term investor interest rate expectations were little changed. According to CME’s FedWatch Tool, as of May 21st, investors saw an 89.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on June 15th-16th, down from 92.0% on May 20th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,874.99
R1 – $1,886.03
R2 – $1,895.02
R3 – $1,906.06
R4 – $1,917.10

S1 – $1,866.00
S2 – $1,854.96
S3 – $1,845.97
S4 – $1,836.98