Gold prices declined from a recent high of $1,846.15 registered on Monday after global bond yields recovered from their losses. Gold prices were seen under pressure as the US 10-year Treasury bond yield bounced from a recent low of 1.469 registered on May 7.

The 10-year T-note yield is currently trading near 1.622 at a 1-week high and the 10-year German bund yield is currently trading near -0.16% which is the highest level seen since March 2020.

The dollar index is currently trading near 90.35 which is sharply lower from a recent high of 93.47 registered on Mar. 31, however, prices have recovered from a recent low of 89.995 registered yesterday. Strength in the dollar index is likely to keep gold prices under pressure.

On the global economic data front, US March JOLTS job openings rose +597,000 to a record 8.123 million (data from 2000), against expectations of 7.500 million. US jobs data is indicating a strong labour market.

German May ZEW survey expectations of economic growth index rose +13.7 to a 21 year high of 84.4, against 72.0. Also, Japan’s March household spending rose +6.2% y/y, against expectations of +1.5% y/y which is the biggest increase in the last one and half year. Positive economic data were negative for gold prices.

However, gold is likely to find support from increasing inflation expectations. China’s April PPI rose +6.8% y/y, the largest increase in 3-1/2 years. Also, the German April wholesale price index rose +7.2% y/y, the largest increase in 10 years.

Gold is receiving continuous support from the dovish central bank comments due to the rising Covid-19 situation in Asia and other parts of the world. Fed Governor Brainard said, “The economic outlook is bright, but uncertainty remains as jobs and inflation are far from the Fed’s goals.”

Also, Atlanta Fed President Bostic said the US labour market is 8 million jobs short of the pre-pandemic level, and it is appropriate for Fed policy to stay in accommodative mode. In addition, Philadelphia Fed President Harker said that “while the economic situation is improving, the recovery is still a work in progress, and there’s no reason to withdraw support yet.”

Gold prices found support after ECB policymaker Klaas Knot said that The European Central Bank will continue to provide copious support to a recession-hit economy even when its 1.85 trillion euro emergency bond purchase scheme ends.

Gold also has underlying support from the Covid-19 pandemic, the overall global Covid-19 caseload has topped 159.3 million, while the deaths have surged to more than 3.31 million, according to Johns Hopkins University.

Gold prices which were unable to sustain the recent rally is likely to face stiff resistance near $1,846-$1,857 while immediate support level is seen around 20 days EMA at $1,796 and 50 days EMA at $1,783.

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