Gold quotes rise amid declining US bond yields

Yellow metal is one of the most important protective assets. Recently, the popularity of precious metal has grown rapidly. Investors are willing to buy it in times of pandemic and economic instability.

What contributes to the demand for gold?

The current dynamics of its quotes makes it possible for investors to assess the prospects for the recovery of the global economy and predict the behavior of prices of other stock exchange instruments. The general state of the global gold market is expressed in the London fixation and exchange rate in US dollars. Since last year, yellow metal quotes have strongly correlated with the American stock market. This is due to the massive entry into the gold market of speculators who seek to make money on the slightest fluctuations in the price of the asset. Institutional investors remain the main consumers of the yellow metal. At the same time, the amount of precious metal in the bowels of the planet is small, unlike paper money, which can be printed in an infinite number. Over the past month alone, more money has been injected into the US financial system than annual gold production costs.

Gold price dynamics in April

This year, gold quotes on the Comex stock exchange in New York rose 16% and are now only 10% below the previous record value of $1923.7 per ounce set in September 2011. The dynamics of quotes in April indicates the possibility of starting a bullish market. For the third week in a row, the yellow metal exchange rate shows growth. On Thursday, April 8, yellow metal quotes rose to $1,750 per ounce. At the trading session at the beginning of the previous week (April 12), an ounce of gold rose to $1,757, reaching a four-week high. The increase in quotations is due to a decrease in the yield of 10-year treasury bonds and the US dollar exchange rate index. According to US statistics, the yield on 10-year Treasury bonds fell from 1.61% to 1.59%. On Tuesday, April 14, gold prices exceeded a maximum of seven weeks. The cost of June futures on the Comex exchange rose 0.5%, to $1768.9 per ounce. The maximum value during the trading session was $1,785 per ounce.

Fed policy continues to influence gold market

The growth of the precious metal exchange rate was influenced by the statement of Jerome Powell, the head of the Fed, who spoke in favor of continuing adaptive monetary policy. In his speech at the Economic Club of Washington, Powell assured that the Central Bank will not continue the asset buyback program until it reaches its targets. Traders in stock markets expect US statistics on unemployment, retail sales and industrial production to be published. This information will help assess the recovery trends of the world's largest economy. In addition, the focus is on disappointing statistics on coronavirus incidence and rising tensions between the United States and China. It is assumed that these two events will help increase gold quotes. The yellow metal price correction period will continue until the official statement of the Fed on the control of the yield curve. After such a statement, the Fed's balance sheet will begin to grow again. At the moment, it is approaching $8 trillion. If the Fed announces a yield curve control program, its balance sheet could rise to $10 trillion by the end of the year. Gold prices will rise along with the growth of the Fed's balance sheet.