Gold trading close to $1,300
After trying to close above $1,300 per ounce on Monday, May 2, 2016, and trading at 15-month high price levels, gold is trading around the important resistance level $1,300 on Tuesday, May 3, without losing much strength. However, silver is consolidating this morning.
At 8:45 AM Eastern time, gold futures contracts for June delivery were trading at $1,298.75 per ounce, a gain of 0.23%. Silver was trading at $17.59 per ounce, a loss of 0.37%.
Increase in fund inflows
The increase in the inflow of money into the gold-backed funds, along with weakness in the dollar, was supporting gold prices on Tuesday morning. Looking into the SPDR Gold Trust ETF (GLD) on Monday, May 2, the total assets in the fund surged by ~2.5% and reached ~824.9 tons.
This represents the highest holdings in GLD since December 2013, and Monday’s surge was the biggest increase since February 22, 2016. The weakness in the dollar is one of the main reasons behind the increase in the money inflow.
Weaker dollar supporting gold prices
The weakness of the US dollar supports the prices of dollar-denominated commodities like gold. The recent disappointing outcomes from major central banks like the US Federal Reserve and the Bank of Japan (or BOJ) on interest rates is keeping the US dollar weaker. In turn, this supports the price of gold.
In addition to this, the recent release of weak US economic data also weighed on the dollar. Investors are looking forward to US nonfarm payroll data, which is scheduled to release on Friday, May 6. This should gauge the strength of the US economy as any interest rate decisions and the strength of the dollar depend on it.
On Monday, May 2, precious metal producers Barrick Gold (ABX), Newmont Mining (NEM), Royal Gold (RGLD), and Silver Wheaton (SLW) fell by ~3.0%, ~1.3%, 1.8%, and ~1.7%, respectively. The SPDR Gold Trust ETF (GLD) fell by 0.33% while the iShares Silver Trust ETF (SLV) fell by 2% on May 2.