Gold Bounces Back on Delta Variant Worries

Gold prices recovered on Wednesday on concerns over the economic impact of the recent surge in Delta variant infections. The yellow metal lost more than 4%on robust U.S. jobs data. The bullion climbed back up despite a strong U.S. dollar and bond yields. The greenback hovers near a three-week peak against rival currencies, and the U.S. Treasury yields soared to their highest levels since mid-July.

Spot gold is currently trading at $1,732.53 per ounce as of 0805 GMT.

SPI Asset Management managing partner Stephen Innes said the lingering concerns about the Delta variant provide some inflows in the Asian session. But gold has yet to recover from the Monday flash crash. He also said that the strong U.S. nonfarm payroll data and the Federal Reserve’s hawkish stance are making the market a little bit nervous.

OANDA senior market analyst Jeffrey Halley suggested that gold remains vulnerable to further sell-offs since it failed to go back up to the $1,750 per ounce level. Thomas Westwater of DailyFX agreed that the technical outlook for the bullion remains bearish since the MACD continues on a downward trend.  He sees an immediate resistance at $1,760 per ounce and support near $1,680.

Meanwhile, market participants are keeping an eye on the monthly report on U.S. personal consumption due today at 1230 GMT. Inflation data could influence the timeline for the Fed’s tapering of monetary support.

But Chicago Federal Reserve Bank President Charles Evans argued that the current inflation rate should not push the central to tighten monetary policy. He wants to see a few more positive monthly employment reports before thinking about withdrawing economic support. Inflation measures are currently around 3.5% annually. But Evans believes it will be temporary and will revert close to 2%.

Another factor that could affect gold prices is the U.S. Senate’s passage of the Infrastructure Investment and Jobs Act. It lifted the U.S. dollar index, Treasury yields, blue-chip Dow, and benchmark S&P 500. The bipartisan bill could provide the biggest investments in decades in America’s roads, airports, waterways, and bridges. After the bill’s approval, Senate Democrats immediately pivoted to the debate on a $3.5 trillion spending blueprint. They plan to push this follow-up package through budget reconciliation.