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Gold price on pause until U.S. bond auctions this week - StoneX

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(Kitco News) Gold is unlikely to make any sudden moves until the U.S. bond auctions this week, according to StoneX, which sees gold's support at just above $1,730 an ounce.

"Gold is marking time today as the professional market looks towards the U.S. bond auctions this week while also digesting the subtle change in tack from Jay Powell last week," said Rhona O'Connell, head of market analysis for EMEA and Asia regions at StoneX.

Markets will be carefully monitoring a slate of bond auctions, scheduled for this week, which would test investors' appetite after Federal Reserve Jerome Powell continued to refer to any price spikes as transitory while ignoring rising yields last week.

This week's auction calendar includes 13-, 26-week bills on Monday; 52-week bills, 42-day cash-management bills, and 2-year notes on Tuesday; 2-year floating-rate notes and 5-year notes on Wednesday, and 4-, 8-week bills, 7-year notes on Thursday.

"In the financial background, the markets have continued to watch government yields, and particularly the U.S. ten-year yield, which has been rising on increasing expectations of a sustainable economic recovery and growing business confidence," O'Connell said on Monday.

After hitting the lowest level since June at the beginning of March, gold seems to be holding well above the $1,700 an ounce level. On Monday, gold was trading above $1,730 an ounce while trading slightly down on the day.

"Gold is finding support from the 10-day and 20-day averages at $1,731 and $1,734 respectively, and resistance from the upper boundary of the eight-week downtrend," O'Connell said. "On a technical basis, the price is in neutral territory, but is now finding support from the ten-day and 20—day moving averages, although there is resistance from the top of the downtrend; so while it is working higher, it is premature to say that the most recent downtrend has been broken."

At the time of writing, June Comex gold futures were trading at $1,740.40, down 0.20% on the day.

Gold's supporting new driver is the re-awakening of the Asian physical demand, according to O'Connell.

"It would seem that as the physical gold market wakes up, the market is remembering that yields are by no means the only influence of gold (and other commodity) prices; geopolitical risk, excess liquidity in the system, and asset management attitudes are all important influences," she said.

O'Connell cited Swiss trade data, which point to slowly accelerating Asian demand after a significant pause in mid-2019. "The latest Swiss trade statistics show that there was a net export of gold to Hong Kong in February – small, but only the third net export since June 2019 when the market started slowing in response to rising prices. Exports to India continued to recover, hitting 58t in February, and exports to Thailand were the highest since mid-2018."

Also on the radar this week is the Powell and Treasury Secretary Janet Yellen's first joint appearance before the U.S. House Financial Services Committee on Tuesday and then before the Senate Banking Committee on Wednesday.

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