Gold is back above the key $1 800 mark, with further gains ahead

GOLD WAS BACK above the psychological $1 800 (R25 280) mark for the first time since February last week and was set to register further gains, analysts said on Friday. The gold price ended trade at $1 831 an ounce, 0.93 percent higher than $1 814 an ounce on Friday on a softer US dollar and a pullback in Treasury yields.

A market analyst at global online trading firm FXTM, Han Tan, said the precious metal’s climb had been helped since April by stabilising Treasury yields, which in turn had led to a moderating US dollar, noting the inverse relationship between gold and the greenback. “The metal is now up around 8 percent over the past two months, since it registered its year-todate low on March 8, and has broken above its 100-day simple moving average,” Tan said.

Real yields on 10-year Treasuries remained firmly in negative territory, while breakeven rates on the same tenor were now around their highest since 2013, Tan said, adding that such conditions had enabled gold prices to pare its year-to-date losses, considering its trait as a zero-yielding asset.

“In order for gold to push higher from current levels, spot prices must carve out an extended presence above $1 800 in order to encourage more bulls to come off the sidelines, especially those who cling to the belief that the precious metal is a worthy hedge against faster inflation,” said Tan.

Gold, which is considered a safe haven during times of uncertainty has averaged $1 798 in the first quarter of 2021 – slightly below the fourth-quarter average of $1 876. The gold bullion price broke several records last year when the Covid-19 pandemic spooked the markets.

Chief analyst at ActivTrades, Carlo Alberto de Casa, also said the dollar’s modest decline had helped gold to break through $1 800 an ounce and up to $1 820 an ounce with the precious metal gaining momentum to climb higher yet.

“Traders are betting on further rallies with the price still more than 10 percent below the peak reached last summer. Investors are worried by rising rates and the risk of inflation making them once again realise that gold could be a safe haven, even though at this point both interest rates and inflation remains low,” said De Casa.

De Casa said the next major resistance levels for bullion were now placed at $1 845 an ounce and $1 872 an ounce. Portfolio manager at Franklin Equity Group, Steve Land, said the higher gold price would support free cash flow for producers. “Although the gold-mining industry’s coronavirus safety precautions (including travel restrictions) have resulted in slightly higher production costs, gold prices moved up much faster than costs over the past year, leaving room for strong margin expansion,” Land said.

Land said other precious metals such as platinum, palladium and rhodium had very different supply and demand profiles, but all these metals are seeing upward price movement so far this year.