Yesterday, gold extended losses due to the strengthening of the US dollar and a rise in the yield of 10-year US government bonds.
Gold fell by 0.3% or $5.50 on Thursday. On the New York COMEX exchange, it closed at $1,895. 70.
A day earlier, gold ended trading above the resistance threshold of $1,900. The price of gold has reached a value that is higher than the closing level of last year.
Gold's rally within this week was mainly associated with two factors: a decrease in the yield of US Treasurers and the weakening of the US currency.
In May, the US dollar has declined by 1%, while gold has risen by more than 7%. Thanks to this increase, gold managed to erase almost all the losses incurred since the beginning of the year.
Gold has slightly retreated as many traders are locking in profits at the end of the month, Chintan Karnani, a chief market analyst at Insignia Consultants, said. US investors partially closed Take Profit orders before leaving for the long weekend.
The economic statistics published on Thursday also had a negative impact on gold, experts say. Despite the generally positive outlook, the quote consolidated above $1,890.
The US labor market unveil upbeat data yesterday. The number of weekly jobless claims decreased by 38,000 and amounted to 406,000. This is the lowest figure since the beginning of the pandemic.
In addition, on Thursday, the US Department of Commerce released GDP data. The indicator did not change in comparison with the estimate in the previous month. It increased in the first quarter by 6.4% per annum.
On Thursday, the media reported that US President Joe Biden would seek $6 trillion in US federal spending for the 2022 fiscal year.
The proposed amount is about a third higher than the pre-pandemic level of federal spending. It gives hope for the rapid revival not only in the US but also in the global economy.
Such positive news usually weigns on the safe-haven assets. Against the background of general optimistic sentiment in the market, the price of gold has dropped a little today.
On Friday morning, at the time of writing this article, the gold futures for June fell to $1,892.8. Compared to the previous close, gold sank by $2.9, or 0.15%.
Nevertheless, gold has been growing for a fourth consecutive week. Since Monday, its value has increased by 0.6%.
The most important event of the week was the breakout of the psychological level of $1,900. Many investors are flocking back to the precious metal market as they are sure that bulls have taken the upper hand.
The breakout of the $1,900 level is very important, Carsten Fritsch, an analyst at Commerzbank, said. However, in the near future, gold may face some difficulties. US economic data may change the trajectory of the US dollar and US Treasuries, which will adversely affect the value of gold.
Today, investors are waiting for the next batch of statistics from the United States. They will mainly focus on the personal consumption expenditure index. It measures monthly changes in the price of consumer goods and services as a means of analyzing inflation. The Fed is sure to take notice of this data.
In addition, not so long ago, Vice Chairman of the Federal Reserve Richard Clarida hinted that at the upcoming meetings, the regulator may begin to discuss the reduction of QE program. Therefore, in the near future, investors will closely monitor the results of these meetings.