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James Hyerczyk
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Comex Gold

Gold futures are edging higher on Thursday, underpinned by a weakening U.S. Dollar while mirroring the price action in 10-year U.S. Treasury Note futures. Treasurys are firming amid falling yields. This is just textbook buying fueled by investors tracking the traditional dollar/gold relationship.

For those expecting the start of a major rally, you may have to wait a while, because there is no urgency to buy the precious metal with U.S. inflation capped. The passage of a new stimulus bill in Congress could provide some support, but if this doesn’t trigger a rise in inflation then we expect gold to move sideways. This price action could last for months.

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At 13:48 GMT, April gold futures are trading $1844.50, up $1.80 or +0.10%.

The market is trading in a tight range with gains and losses likely being limited by light volume due to Lunar holidays in Japan and China. The lack of fresh developments over President Biden’s $1.9 trillion coronavirus relief package is also weighing on volatility.

US Consumer Prices Increased Steadily in January, but Core Consumer Prices Remained Flat

U.S. consumer prices rose moderately in January and underlying inflation remained benign as the pandemic continues to be a drag on the labor market and services industry.

The Labor Department said on Wednesday its consumer price index increased 0.3% last month after climbing 0.4% in December. In the 12 months through January the CPI rose 1.4% after a similar gain in December. Economists polled by Reuters had forecast the CPI rising 0.3% and increasing 1.5% year-on-year.

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Treasury Yields Slump Following Fed Chair Powell’s Comments on Employment

U.S. Treasury yields slumped on Thursday morning, after Federal Reserve Chairman Jerome Powell painted a gloomy picture on U.S. employment due to the coronavirus pandemic.

U.S. government bond yields slipped after Powell told the Economic Club of New York on Wednesday that the U.S. is “a long way” from where it needs to be in terms of employment. He also said monetary policy would need to remain “patiently accommodative” to deal with this issue.

Jobless Claims Worse than Expected as Pandemic-Related Filings Surge

First-time claims for unemployment insurance totaled 793,000 last week as declining COVID-19 cases provided little relief for the jobs market. The total for the week ended February 6 was above the 760,000 forecast from economists surveyed by Dow Jones but a slight decrease from the previous week’s upwardly revised total of 812,000.

Daily Forecast

Gold showed no reaction to the worse than expected weekly jobless claims report. It should have rallied on the news because it increases the need for fiscal and monetary stimulus. But unless President Biden asks for more than $1.9 trillion, the passing of his coronavirus relief package has been already priced into the market. If anything, it could get smaller, which would weigh on gold prices.

Monetary stimulus from the Fed is providing support, but unless the Fed increases its QE substantially, this is not enough to spike gold prices higher.

Gold could spike higher if 10-year U.S. Treasury note yields fall back below 1.0%. So if you bullish gold, that’s what you would what to see.

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