Yesterday, gold bullion finished trading at $1,784.40. The price of the metal fell by $3.40, or 0.2% compared to Tuesday, when it lost 0.1% of its value. Thus, gold showed a negative trend following the results of two consecutive sessions.
Meanwhile, yesterday cannot be called an unsuccessful day for the yellow precious metal. During the trading, it made several attempts to grow. At first, the price briefly rose after the release of data from the Ministry of Housing and Urban Development. The report pointed to a decrease in the start-ups of new homes last month. The indicator fell by 7% against the June rise of 3.5%.
The quotes were also supported by coronavirus news. Investors actively bought gold and silver amid growing uncertainty about the spread of the COVID-19 delta variant and its impact on the economy.
Fears intensified after the release of weak US retail sales data on Tuesday. In July, the indicator fell by 1.1%, not meeting the expectations of economists.
The demand for gold as a safe haven asset is also growing against the background of the tense geopolitical situation in South Asia. The conflict in Afghanistan has reduced investors' appetite for risky financial instruments, but increased their interest in reliable ones.
Another fundamental factor that acts as a springboard for the yellow metal is doubts about the sustainability of the economic recovery in China.
In addition, yesterday, gold tried to benefit from the minutes of the July meeting of the US Federal Reserve. The US regulator proposed to reduce bond purchases by the end of 2021. At the same time, it hinted that a rate increase is not expected in the near future.
Shortly after the release of the report, the dollar and the yield of US Treasury bonds began to decline, and the value of the precious metal – on the contrary, rose. At one point, the quotes soared to $1,789.20.
Analysts attribute this rise to the fact that initially the Fed's tone was perceived as more "dovish". However, the optimism in the precious metals market did not last long. Having digested the information received, investors still gave the opposite assessment to the mood of the regulator.
This was partly facilitated by the comment of the president of the St. Louis Federal Reserve, James Bullard. Yesterday, the official expressed the opinion that the American economy will not be undermined by the delta variant of the coronavirus. He noted significant progress in its recovery, which is a signal for the beginning of a reduction in asset purchases by the central bank.
The minutes of the Fed's July meeting also showed that the US central bank sees an opportunity to start curtailing bond purchases this year if the economy continues to improve. Thus, the regulator hopes to solve the problem of inflation and currency depreciation, which is negative for gold, but good for the dollar.
Feeling the spirit of the long-awaited changes, the US currency began to rise rapidly and reached a more than 9-month high by Thursday morning. Against this background, gold lost its growth momentum and took a downward route. So, at the time of preparing the material, the quotes sank by 0.28%, or $5.05, dipping to $1,779.
IG Market analyst Kyle Rodda believes that in the coming days, the dynamics of gold will be determined by speculation related to the Fed's proposal to reduce bond purchases, and what the regulator may say on this issue at the upcoming symposium in Jackson Hole.
Investors expect that the Fed will make an official statement on the reduction of asset purchases at the monetary policy conference, which will be held next week. There is also an assumption that this issue will be raised during the September meeting of the regulator.
Meanwhile, experts draw attention to the fact that the minutes of the Fed's July meeting have increased the importance of jobs reports for the next few months. Before starting the process of winding down, the regulator will have to make sure that the labor market is recovering and the coronavirus has not started to slow down the economy again.
By the way, at present, coronavirus fears still support the rejection of risks. If this trend continues, the demand for reliable assets is likely to remain strong. In such favorable conditions, the next key level for gold may be the $1,850 mark, Oanda analysts predict.
