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James Hyerczyk
Comex Gold

Gold futures finished lower on Friday, easing from a two-week high reached the previous session as some investors booked profits ahead of the week and on the strength of the U.S. Dollar against a basket of major currencies.

Losses may have been limited by the hopes that fresh stimulus could be coming from the Biden Administration although there could be problems with the timing of the coronavirus relief and the size of the package.

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On Friday, April Comex gold settled at $1856.20, down $13.10 or -0.70%.

Better-than-expected U.S. economic data may have also capped gains since it pointed toward an improving economy although jobless data on Thursday indicated that a weakening labor market could continue to be a drag on the economy.

Gold traders are also watching rising coronavirus cases in China and the Euro Zone. China could single-handedly pressure the global economy, which would increase the need for more fiscal and monetary stimulus worldwide. The Euro Zone is probably headed into another recession, which could weigh on the Euro, thereby boosting the U.S. Dollar Index.

Biggest Influence on Gold Will be Direction of Treasury Yields

The 10-year Treasury yield dipped on Friday morning, as President Joe Biden’s proposed $1.9 trillion stimulus package faces opposition in Congress just a week after he announced the plan.

The yield on the benchmark 10-year Treasury note fell to 1.086%, while the yield on the 30-year Treasury bond dipped to 1.847%.

The drop in Treasury yields came as moderate Republican senators critiqued Biden’s plan, while another Democrat lawmaker said he would oppose another coronavirus relief check to Americans.

Here’s the tricky part that could confuse gold traders.

If Biden’s gets his $1.9 trillion stimulus package, in other words, everything he is asking for, then inflation could go up. If inflation goes up then Treasury yields will move higher, helping to support the U.S. Dollar. A stronger dollar will then drive down foreign demand for dollar-denominated gold.

If the Biden plan struggles in Congress and a smaller package is passed then stocks could pull back, which means demand for risky assets would fall. This would also send investors into the safety of the U.S. Dollar, and once again, gold prices could be capped.

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Short-Term Outlook

At this time, there is no clear bullish catalyst for gold so a rally may have a hard time gaining traction. The long-term fundamentals are bullish enough to provide support, but a runaway rally like we had last year from April to August is just not in the cards right now.

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

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