Gold futures closed higher on Friday after 10-year U.S. Treasury yields and the U.S. Dollar Index pulled back from their intraday highs. The move wasn’t strong enough, however, to erase its first weekly loss in three weeks.
The market has been moving mostly sideways to lower all week with investors buying dips and selling rallies. A firmer dollar and rising yields have been pressuring gold, but rising coronavirus cases and lockdowns in Europe as well as the U.S. Federal Reserve’s loose policy have been lifting prices. The direction has been unclear with the price action suggesting both investor indecision and impending volatility.
On Friday, June Comex gold futures settled at $1734.70, up $7.40 or +0.43%.
10-Year U.S. Treasury Yield Comes Off Its High
Helping to provide some support for gold on Friday, was a dip in the U.S. 10-year Treasury yield from its intraday high as the latest inflation data showed subdued price pressures.
The yield on the benchmark 10-year Treasury note last traded up 3 basis points to 1.65%. The rate jumped 6 basis points earlier. The yield on the 30-year Treasury bond rose to 2.394%.
Dollar Edges Lower but Remains Close to 4-Month High on Economic Optimism
The U.S. Dollar finished down against a basket of major currencies on Friday, but held near its four-month peak, on continued optimism about the U.S. economy. After an early session surge, the dollar spend most of the session giving back its earlier gains. This helped boost foreign demand for dollar-denominated gold.
US Consumer Spending, Income Temporarily Fall Ahead of Massive Fiscal Stimulus
U.S. consumer spending fell by the most in 10 months in February as a cold snap gripped many parts of the country and the boost from a second round of stimulus checks to middle- and lower-income households faded, Reuters Reported
But the drop in consumer spending, the biggest since mandatory shutdowns of nonessential businesses like restaurants last April to slow the spread of COVID-19, is seen as temporary. The economy is poised to log its best performance in 37 years, thanks to the White House’s massive $1.9 trillion pandemic relief package and increased vaccinations against the coronavirus.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, dropped 1.0% last month amid a broad decline in purchases of goods, the Commerce Department said on Friday. That followed a 3.4% rebound in January.
Personal income tumbled 7.1% after surging 10.1% in January. Economists polled by Reuters had forecast consumer spending would decrease 0.7% in February and income would decline 7.3%.
With demand soft, inflation retreated. The personal consumption expenditures (PCE) price index excluding the volatile food and energy component gained 0.1% after rising 0.2% in January. In the 12 months through February, the so-called core PCE price index climbed 1.4% after increasing 1.5% in January. The core PCE price index is the Fed’s preferred inflation measure for its 2% target, a flexible average.
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