Gold is currently trading near $1913, which was the highest level on Jan. 11, 2021. Weakness in the US dollar index against other currencies, and in global bond yields are keeping gold prices higher.
Growing concern about inflation in the US, UK, and Eurozone is also providing support, since gold is used as a hedge against inflation. However, it is likely to get a fresh direction from the monthly NFP data for May ’21, which is scheduled to be released later this week.
Dovish global central banks and signs of faster price pressures are positives for gold. ECB Executive Board Member Schnabel signaled the ECB will maintain its pace of asset purchases and is bullish for precious metals. Schnabel said higher bond yields are a "natural development at a turning point in the recovery," but a premature withdrawal of monetary or fiscal support would be a mistake, and that new data must be assessed before deciding on the pace of bond buying.
On the economic data front, Caixin’s China manufacturing purchasing managers’ index (PMI) rose to 52.0 in May from 51.9 in April, supported by strong new export orders.
Eurozone manufacturing activity expanded at a record pace in May. IHS Markit’s final Manufacturing Purchasing Managers’ Index (PMI) in the Eurozone rose to 63.1 in May from April’s 62.9, above an initial 62.8 “flash” estimate and the highest reading since the survey began in June 1997.
Increasing economic optimism is likely to keep a cap on gold prices as global central banks may taper COVID-19 relief stimulus to some extent to control inflation after seeing positive growth numbers.
According to the CFTC Commitments of Traders report for the week ended May 25, net long for gold futures increased by 15,753 contracts to 214,642 for the week. Speculative long positions dropped by 2001 contracts, while shorts dropped by 17,754 contracts.
Gold prices are likely to trade firm while above the key support level—20 days EMA of $1875—however, it is likely to face stiff resistance near $1923-1940.