Gold rebounds to $1950s as US dollar/yields reverse lower

4.21.22 - The Fed's Poison Pill Will Kill The Dollar

Gold last traded at $1,946 an ounce. Silver at $24.54 an ounce.

NEWS SUMMARY: Precious metal prices eased Thursday on upbeat economic data despite a weaker dollar. U.S. stocks rose as investors digested more quarterly results - including strong earnings from Tesla - and awaited a policy speech from Fed Chairman Jerome Powell.

FX Street--"Spot gold prices are staging a modest rebound on Wednesday after finding support at the 21-Day Moving Average in the mid-$1940s as the US dollar weakens and US yields pull back from recent highs. XAU/USD currently trades with on-the-day gains of about 0.2% in the mid-$1950....

Profit-taking has seen the US Dollar Index pull back by about 0.6% to the low 100.00s after it hit its highest levels since March 2020 above 101.00 on Tuesday. This is helping to make USD-denominated gold a little cheaper for purchase by the holders of foreign currency.

Meanwhile, after coming within a whisker of hitting 3.0% earlier in the day, US 10-year yields have reversed back under 2.90% and are about 7 bps lower, marking a slight reduction in the 'opportunity cost' of holding non-yielding assets like gold.

With Fed Chair Jerome Powell expected to solidify expectations for 50 bps rate moves at the next few Fed meetings, the recent trend of a stronger US dollar and higher US yields may yet have further legs to run. That suggests gold may continue to struggle to get back above $2000.

However, amid the recent run of negative news flow on the Russo-Ukraine war front (peace talks appear dead as Russia ramps up its assault in the east of Ukraine and the US/NATO up their arms deliveries), further gold pullbacks into the lower $1900s will likely to continue to attract buyers.

After all, as the stagflationary impulse of the war becomes more apparent, with the IMF and World Bank recently revising lower global growth expectations and warning of elevated inflation for longer, demand for assets that provide a safe haven/inflation-protection remains strong."