Gold Hovers Near $1,800 As Weaker Dollar And Yields Offset Risk Appetite

Gold prices held steady on Wednesday as the weaker dollar and lower yields countered the less-hawkish comments from Federal Reserve officials.

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The greenback eased fell from 19-month highs and made the bullion less expensive for other currency holders. The benchmark 10-year Treasury yields plunged near a one-week low. It lowered the opportunity cost of owning the yellow metal.

Spot gold is currently trading at $1,799.37 per ounce as of 0830 GMT.

Overnight several Fed officials released dovish remarks regarding the rate hike cycle. A noted hawk, St. Louis Federal Reserve President James Bullard said he would support successive rate increases in March, May and June. But he is not in favor of a 50-basis point rate increase. Atlanta Fed President Raphael Bostic had the same opinion.

Philadelphia Fed President Patrick Harker agreed that 25-basis-point increases would be appropriate. But unlike Bullard and Bostic, he is open to four rate hikes in 2022. San Francisco Fed President also expressed support for four increases this year. Meanwhile, Kansas City President Esther George suggested a prompt end to quantitative easing may pave the way for more gradual interest rate increases this year.

Another factor that supported gold in today’s session is the Russia-Ukraine conflict. In his first comments on the issue in six, President Vladimir accused the West of ignoring their security concerns over Ukraine and creating a scenario to lure Russia into war.

On the opposite side, Ukraine President Volodymyr Zelenskiy met with other western leaders including British Prime Minister Boris Johnson and Polish Prime Minister Mateusz Morawiecki. Johnson and Morawiecki expressed their support in case of a Russian invasion.

Still, another factor that favors the bullion is the decline in U.S. manufacturing activity, which dropped to a 14-month low in January. It indicates that the economic growth lost steam due to an outbreak of Omicron cases.

On the technical front, DailyFX strategist Daniel McCarthy noted the recovery of gold prices this week on the Fed’s dovish comments. But the central bank’s efforts to achieve its inflation target could be detrimental to the bullion. It would push nominal and real yields higher.

McCarthy sees support level at the previous lows of $1,780.36, $1,778.50, $1,761.99, $1,758.93 and $1,753.10. On the topside, he expects resistance pivot points and previous highs of $1,829.68, $1,831.65, $1,847.94, $1,853.83 and $1,877.15.

In a related development, the holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust (GLD), soared to their highest level since mid-August 2021. It reflects current investor appetite and market sentiment.