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Gold prices extended a rally on Tuesday, with the precious metal regaining traction above the psychologically significant level at $2,000 amid persistent weakness in the U.S. dollar and slack in government bond yields.
One gauge of the buck, the ICE U.S. Dollar Index DXY, -0.36%, was down 0.3% at 92.55, hanging around the lowest level for the gauge against a half-dozen currencies since around 2018, according to FactSet data.
A weaker dollar can boost the appeal of gold because it is priced in the currency while receding yields can lower the opportunity cost of favoring bullion, which doesn’t offer a yield, over Treasurys.
“A spike in global bond yields tormented the yen and gold last week but all that is turning around, as yields are back on the decline,” wrote investment analyst Marios Hadjikyriacos at brokerage XM, in a note.
The 10-year Treasury note yield TMUBMUSD10Y, 0.677% was around 0.68%, little-changed from its level on Monday.
“Despite last week’s correction, the factors that brought bullion to the dance are still present. Central banks and deficits remain in play, there’s a US election coming up, and tensions with China are getting worse if anything,” Hadjikyriacos wrote.
Moves in bullion come as the global death toll for the coronavirus pandemic approached 775,000, according to data compiled by Johns Hopkins University. And signs of Sino-American tensions were evident as the U.S. Commerce Department issued new rules curbing Huawei Technologies’s access to foreign-made chips Monday.
December gold GCZ20, +0.77% GC00, +0.77% rose $16.20, or 0.8%, at $2,014.80 an ounce, after the metal climbed 2.5% on Monday to mark its best point and percentage gain since April 22.
Meanwhile, September silver prices SIU20, +2.17% picked up 64 cents, or 2.3%, to trade at $28.310 an ounce, following a 6% rally in the prior session.
