Gold prices soar on Tuesday as part of the correction after the recent fall. Quotes rose above $1,700 per ounce.
The price of the April gold futures contract on the Comex rose 0.5%, to $1,686.35 per troy ounce. At the time of writing this article, the XAU/USD pair was already trading at $1,708. As you can see, the quotes of the precious metal are trying to compensate for some of the losses incurred before.
Recall that the price of gold on Monday updated its minimum since April 2020, having decreased by about 1.6%. The fall of the precious metal was facilitated by the strengthening of the US dollar against the background of high yields on US government bonds. The reluctance of the US Federal Reserve to take any action regarding the current situation in the debt market played an important role in the decline in demand for gold. The Fed Chair Jerome Powell said that the sharp rise in yields on the bond market is a natural reaction to the economic recovery and is unlikely to be determined by any speculation.
To some extent, the report released last Friday, which reflected the state of the US labor market, also contributed to the decline in gold prices. The published data showed that the number of new jobs created outside the agricultural sector in February increased by 379,000 (in the previous period, new jobs increased by only 166,000), while the unemployment rate fell from 6.3% to 6.2%. As you can see, the published data turned out to be significantly better than the forecasts, which provided additional support to the US dollar. And the more expensive dollar reduced the demand for gold, which was less affordable for market players who own other currencies.
Investors are optimistic about the prospects for a global economic recovery. An ongoing vaccination plan and strong support from governments and central banks are helping to mitigate global risks. And against the background of such sentiments, the demand for gold as a reliable asset is noticeably decreasing.
Unfortunately, the record price of the precious metal of $2,000, which was achieved in the summer of 2020, remains an unattainable goal. Moreover, at the end of each month (apart from December), since those record levels, gold quotes have only shown a decline. The most depressing indicators were observed in November when the precious metal sank in price by 5.7%. In February, the rise in risk sentiment among market participants against the background of the active deployment of vaccination against coronavirus ensured a significant drop in the value of gold by as much as 6.6%.
