Gold futures soared back above $1,800 to start the trading week, buoyed by a weaker US dollar and expectations that the Federal Reserve will ease tapering concerns during this week’s annual central bank retreat. But gold prices enjoyed a pop on Monday, they have declined 4% over the last three months.
October gold futures advanced $23.80, or 1.33%, to $1,807.80 per ounce at 19:14 GMT on Monday on the COMEX division of the New York Mercantile Exchange. The yellow metal is coming off a weekly gain of 1%, paring its year-to-date loss to below 5%.
Silver, the sister commodity to gold, is also ballooning to start the trading week. September silver futures rose $0.533, or 2.31%, to $23.645 per ounce. The white metal shed 0.8% last week, adding to its 2021 slump of close to 11%.
This is the first time that gold prices settled above the critical threshold of $1,800 in two weeks, thanks to a plummeting greenback.
The US Dollar Index (DXY), which measures the greenback against a basket of currencies, fell 0.54% to 92.99, from an opening of 93.50. The index has surged this year 3.4%, which has been bearish for the precious metal. A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
This week, the Fed will hold its Jackson Hole summit, where it is likely that Chair Jerome Powell will smooth taper concerns and refrain from firing the first salvo in tightening monetary policy. Last week, policy minutes from the Federal Open Market Committee (FOMC) meeting suggested that officials agreed that now would be an appropriate time to unwind its $120-billion-a-month quantitative easing (QE) program, but it is likely that interest rates will remain unchanged until late next year.
Moreover, Delta variant concerns are still plaguing investors and the broader economy, prompting traders into the conventional safe-haven asset.
“A significant reversal in the dollar and broad-based risk on psychology has lifted gold and the rest of the metals complex off fundamental reasons to start the new trading week,” analysts at Zaner metals wrote in Monday’s market update. “Others are suggesting that the ongoing surge in the delta variant infections is still threatening the global economy and that, in turn, is providing flight to quality buying interest in gold.”
“At least in the coming two sessions, the gold and silver trade might avoid the subject of U.S. tapering until the Jackson Hole symposium begins,” he added.
The US Treasury market was mixed to start the trading week, with the 10-year yield down 0.005% to 1.255%. The one-year bill edged up 0.003% to 0.066%, while the 30-year bond rose 0.001% to 1.874%. Lower bond yields are bullish for metal since it reduces the opportunity cost of holding non-yielding bullion.
In other metal commodities, October copper futures jumped $0.0845, or 2.04%, to $4.2215 a pound. September platinum futures advanced $19.00, or 1.91%, to $1,013.20 per ounce. October palladium futures skyrocketed $118.50, or 5.21%, to $2,395.00 an ounce.