Gold Steadies With Traders Weighing Lower Dollar, Growth Outlook
An employee handles 1 kilogram gold bars in Munich. (Photographer: Andreas Gebert/Bloomberg)

Gold Steadies With Traders Weighing Lower Dollar, Growth Outlook

Gold was little changed as investors assessed a decline in the dollar against bets that the incoming U.S. administration will use its legislative firepower to boost economic growth.

U.S. Treasury Secretary nominee Janet Yellen said in a Senate confirmation hearing that help for the unemployed and small businesses would provide the “biggest bang for the buck,” and urged lawmakers to “act big” in efforts to rescue an economy battered by the coronavirus. U.S. equities pushed toward all-time highs and U.S. Treasury yields advanced, eroding demand for gold, which doesn’t offer interest.

Bullion has mostly treaded water this year after a surge in 2020 as rising yields and prospects for economic recovery diminish the appeal of the metal as a haven asset. Investors are weighing that outlook against the possibility that further stimulus could weaken the dollar and lift consumer prices, with the metal often seen as an inflation hedge.

Gold Steadies With Traders Weighing Lower Dollar, Growth Outlook

“It looks like the reflation trade is back on with most risk assets rising,” Fawad Razaqzada, market analyst at ThinkMarkets said in a Tuesday note. “The positive sentiment is partly a reflection of hopes for more government spending.”

The technical picture for gold is also working against the metal, with its 50-day moving average close to crossing below the 200-day moving average -- a so-called death cross that can signal a protracted decline. Meanwhile, a report Friday showed hedge fund and other large speculators cut their net-long bullion position in U.S. futures and options to the lowest since November.

Gold Steadies With Traders Weighing Lower Dollar, Growth Outlook

“Gold traders and investors are going through a bit of a confidence crisis following the recent dollar and yield spike,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “Hedge funds cutting longs by 31% last week is a clear sign that current price action is not giving any strong buy signals.”

Spot gold lost less than 0.1% to $1,840.14 an ounce by 3:34 p.m. in New York. Silver and palladium fell, while platinum was little changed. The Bloomberg Dollar Spot Index declined 0.2%.

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