Gold inching higher, recovering off Wall Street's risk-on lows

• Risk-on weighed on gold on Wall Street, but Asia is making for some risk-off volatility again.
• US dollars were back in vogue with the DXY rising 1.7% on the day, also weighing on gold.

The risk-on tone in markets saw the precious metals sector suffer. overnight although the price of gold is perky in Asia, +0.5% at the time of writing following a climb from the lows of $1,641 on Wall Street. Gold is trading at $1,657.57 between a range of $1,649.46 and $1,659.26 in Asia. There was a relief overnight on the back of what has been a co-ordinated fiscal response to the coronavirus, helping US stocks to recover and weighing on the precious metal.

Us President Donald Trump said overnight that he would discuss “a possible payroll tax cut or relief, substantial relief, very substantial relief, that’s big, that’s a big number,” and consequently, the Dow Jones Industrial Average, DJIA, added around 1,163 points, or 4.9%, to end at 25,014, the S&P 500 SPX finished around 135 points higher, up 4.9%, near 2,882 and the Nasdaq Composite ended around 8,344, up 394 points, or 5%. 

At the same time, US dollars were back in vogue with the DXY rising 1.7% on the day to complete a 38.2% Fibonacci retracement of the Feb sell-off. The US 2-year Treasury yields added from 0.38% at Monday’s close to 0.53% while the 10-year yields surged from 0.54% to 0.80% over the day. However, markets are still pricing a 90% chance of a 75bp cut at the next FOMC meeting on 18 March. Gold for April delivery on Comex lost $15.40, or 0.9%, to settle at $1,660.30 an ounce, after posting a slight 0.2% gain on Monday.

Investors continue to build their exposure to the sector

"Gold is holding at higher levels as extended speculative positioning has been harder to shakeout with dips becoming shallower, while ETF holdings have also surged to all-time highs in recent days," analysts at TD Securities explained. "While short-term runs to liquidity remain a risk, further rate cuts and stimulus measures globally offer fundamental backing, suggesting the precious metals rally is here to stay. "

Analysts at ANZ Bank argued that "despite the retracement from USD1,700/oz, investors continue to build their exposure to the sector. Gold held in ETFs jumped by 47t on Friday and Monday, the biggest two-day advance since July 2016."

Gold levels