On Friday, the bullish trend that lasted for 6 trading sessions reversed. The US's strong manufacturing PMI put the asset under pressure. In early May, the indicator increased sharply amid stronger client demand.
Positive business activity results boosted the greenback. The US dollar climbed by 0.3% against the basket of currencies, while gold incurred losses.
The precious metal sagged by 0.3%, or $5, closing at $1.876.7 on Friday. Silver dropped by 2.1%, or $0.58, to $27.486.
Despite Friday's bear trend, both metals increased last week. Thus, gold futures contracts soared by more than 2% within the reporting period. The gold market has been bullish for the third trading session in a row.
Silver contracts for delivery in July added 0.4% last week. The precious metal was able to recover losses from a week before.
Several factors provided support for gold last week. The main one was growing uncertainty over the Federal Reserve's future stance on monetary policy.
The April meeting that took place on May 19th did not clear things up. Investors suggest that interest rates will not be increased in the short term.
Gold also encountered support from a weaker US dollar last week. The US dollar index dropped by more than 1% in a week and plummeted by over 3% in a quarter.
Moreover, the price of gold advanced as bitcoin plunged along with other leading digital coins. Because of a collapse in the cryptocurrency market, investors doubt that BTC will become new gold. They are now turning the safe-haven asset.
Last week became a turning point for gold as the price was steadily rising to $1,900 per ounce, while trading was mixed in other markets.
According to Ed Moya, a Senior Market Analyst at OANDA, it was one of those weeks that changed the rules of the game for many traders. The crypto bubble has burst. Investors are no longer sure that bitcoin is a great hedge against inflation.
The expert reckons that BTC's reputation as an extremely volatile instrument will allow gold to become attractive again. Moreover, selling of gold-backed ETFs has stopped, and inflationary fears are growing in the meantime.
Gold is expected to skyrocket in the short term. The price may even break the $1.900 barrier if only the Fed does not decide to taper the stimulus program.
This week, gold will try to break the January high of $1.900 according to Ed Moya.
On Monday, the gold market is in the bullish trend. At the moment of writing, the asset gained 0.48%, or $9.05, to $1,885.75.
Meanwhile, silver futures contracts for delivery in June also went up and traded at $27.795. The difference in value from the previous closing price was 1.12%.
A decline in yields of 10-year bonds also boosted the price of gold. Early on Monday, the reading dropped to 1.92%. In addition, the quotes are rising as investors' concerns over inflation are growing.
The Fed does not deny that prices will keep on rising as it may be impossible to eliminate all factors that contribute to inflation growth. In this light, demand for gold as a hedge against inflation will increase.
According to Kevin Grady, president of Phoenix Futures and Options LLC, the gold market is obviously in the bullish trend. For the trend to extend, the price should consolidate at the support level of $1,846. If gold tests the level this week, the trend will continue. Otherwise, the next support level will be seen at $1,808.
This week, investors will focus on several crucial reports that may affect the price of gold. Thus, the Conference Board consumer confidence index is due on Tuesday, while the durable goods orders report will be released on Thursday.
According to Bart Melek, a commodity strategist from TD Securities, weaker than expected data will have a positive impact on the precious metal as the market will see that the Fed does not need to hurry to tighten monetary policy.
Other major reports in the US this week are GDP, personal income, and personal spendings.
