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Metals Stocks: Gold prices resume climb toward resistance at $1,900 as dollar, yields weaken

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Gold futures on Monday climbed, attempting to test resistance around $1,900 an ounce, as weakness in the U.S. dollar and Treasury yields, as well as volatility in bitcoin, lent some support to bullion buying.

“Gold is pushing higher mainly on account of the weaker dollar and persisting inflationary concerns, coupled with the fact that the intense volatility in bitcoin could be driving some speculative flows back into the precious metal,” Edward Meir, analyst at ED & F Man Capital Markets, wrote in a daily note.

June gold
GCM21,
+0.42%

GC00,
+0.42%

 rose $6.90, or 0.4%, to trade at $1,883.60 an ounce, following a weekly gain of 2.1%, which marked the metal’s third straight weekly advance.

Some strategists view $1,900 for gold as a point of resistance that could help gauge how bullish investors have become about bullion.

Still, gold’s recent ascent is setting it up for the best monthly gain since December as worries about a choppy recovery from COVID in parts of the world and uncertainties about inflation have helped to support the precious metal, strategists said.

“Falling Treasury yields and a softer tone surrounding the greenback have provided good conditions for gold prices to rise,” wrote Sophie Griffiths, market analyst at Oanda, in a note.

The 10-year Treasury yield
TMUBMUSD10Y,
1.593%

edged lower from last Friday’s finish at around 1.62%. Falling yields can benefit precious metals and other commodities, which don’t offer a coupon, by reducing the opportunity cost of holding them against yield-bearing assets.

Meanwhile, the dollar was off 0.3%, as measured by the ICE U.S. Dollar Index
DXY,
-0.21%
.
A weaker buck can make assets priced in the currency more attractive to overseas buyers.

Turbulence in crypto assets, like bitcoin
BTCUSD,
+11.54%
,
also has provided some support to bullion, strategists speculate.

“The huge selloff in crypto land could have also played a role, with investors likely looking towards gold after liquidating positions in cryptocurrencies such as bitcoin,” Griffiths said.

Other Comex metals traded on a mixed note, even as China authorities issued a “zero tolerance” warning to commodity speculators on Monday, leading to a tumble in prices of some assets.

China’s National Development and Reform Commission vowed that regulatory authorities will track commodity prices and beef up supervision of the related futures and the spot market.

“One signal we track carefully for commodities and global growth, the strength of the Chinese yuan, is flashing green again after having weakened early in May,” said Arnim Holzer, macro and correlation defense strategist with EAB Investment Group, in a note.

“The Chinese concerns about commodities speculation have muted those levels” but SPDR Gold Shares
GLD,
+0.28%

and iShares Silver Trust exchange-traded funds have “performed better due to crypto difficulties.”

If the COVID recovery improves globally, “commodities could see some more life despite the Chinese anti-commodities speculation salvo,” Holzer said.

July copper
HGN21,
+0.97%

climbed nearly 0.9% to $4.52 a pound on Comex and July platinum
PLN21,
+0.81%

added 1.2% to $1,183.10 an ounce, but June palladium
PAM21,
-0.70%

shed 0.5% to $2,762 an ounce. The September palladium contract, which is also among the most active, traded at $2,772.50 an ounce, down 0.4%.

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