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(Bloomberg) – Gold has recouped most of its losses after falling sharply at the start of Asian trading, but remains under pressure as bets mount that the US Federal Reserve may soon start cutting its massive monetary stimulus.
Spot bullion fell more than 4% early on Monday, dropping $ 60 in minutes, as the sell-off following Friday’s better-than-expected employment data accelerated early in trading. Gold likely collapsed after breaking above a technical support level and triggering stop losses, all on a low liquidity day due to the holidays in Japan and Singapore, said Marcus Garvey, chief strategy officer. metals at Macquarie Group Ltd.
While prices have rebounded from the initial decline, gold is still under pressure. A close at current levels would be the lowest since April after strong U.S. jobs figures last week helped the metal break out of a one-week trading range around $ 1,800 per ounce. Inflation-adjusted Treasury yields surged on Friday’s data, putting pressure on non-interest-bearing gold.
Comments from Dallas Fed Chairman Robert Kaplan that the central bank should start cutting asset purchases as soon as possible have fueled fears that the stimulus might be held back.
Bullion was down 1% to $ 1,745.91 an ounce at 9.45am in London, after hitting its lowest level since March and approaching its lowest level in over a year. In the futures market, more than 3,000 contracts changed hands in a minute, the equivalent of over $ 500 million in notional value, as activity increased in a generally quiet trading period.
Gold “recovered in the trade as bargain hunters took advantage of the low price to enter the market,” said Falkmar Butgereit, senior trader at refiner Heraeus Metals Germany GmbH & Co. KG. Still, “many investors are now worried that the Fed will soon start cutting its bond purchases, raising expectations for interest rate hikes in 2022/2023.”
Attention will turn to new economic data later this week to assess the health of the coronavirus recovery, as well as inflation. The consumer price index expected on Wednesday is expected to post a smaller increase than the month before, as pressures on supply chains caused by the reopening eased. This could support the Federal Reserve’s view that inflationary pressures will prove to be transient.
In other markets, silver fell 1.8% after hitting its lowest level since December. Platinum fell while palladium was stable. The Bloomberg Dollar Spot Index was little changed.
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