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James Hyerczyk
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Gold

Gold futures are down shortly after the cash market opening on Thursday, giving up earlier gains after U.S. Treasury yields suddenly reversed to the upside during the overnight session. Providing additional pressure was a firmer U.S. Dollar, which dampened demand for the dollar-denominated asset.

At 12:09 GMT, June Comex gold futures are trading $1777.00, up $3.10 or +0.17%. This is down from a high of $1789.90.

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Traders are now awaiting the release of U.S. economic data after the Federal Reserve said on Wednesday it was too early to consider rolling back its support measures.

Fed Recap

The Federal Reserve said that it would hold interest rates near zero. The Fed also took a rosier view of the U.S. economic recovery and the nation’s war against the coronavirus, but said it was too early to consider rolling back its emergency support with so many workers still left jobless by the pandemic.

Though inflation is due to rise, Powell said the coming price increases would almost surely be of a passing nature, and not present the sort of persistent problem that would force the Fed to begin raising interest rates sooner than expected.

Gold rallied on the Fed announcements and Powell’s comments after Treasury yields fell.

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Joe Biden’s Speech Before Congress

Late Wednesday evening, President Joe Biden proposed a sweeping new $1.8 trillion plan in a speech to a joint session of Congress on Wednesday, pleading with Republican lawmakers to work with him on divisive issues and to meet the stiff competition posed by China.

Pushing a vision of more government investment funded by the wealthy, the Democratic president urged Republicans who have so far resolutely opposed him to help pass a wide array of contentious legislation from taxes to police reform to gun control and immigration.

Biden’s comments were potentially bullish for gold because they signal more government spending, however, his proposals are still a long way off from being turned into law.

Daily Forecast

Treasury yields are controlling the price action and we should see more of their influence on gold following the release of today’s U.S. GDP and weekly initial claims report.

Advance GDP is expected to show the economy grew by 6.8%. Unemployment claims are expected to come in at 545K. Pending Home Sales are expected to rise 4.2%, up from -10.8%.

Although Fed Chair Powell said yesterday that “it is not time yet” to begin discussing any change in policy, strong economic data today could encourage bond traders to believe otherwise. This could drive yields higher, putting more pressure on gold.

For a look at all of today’s economic events, check out our economic calendar.
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