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Gold prices were headed higher Wednesday, with investors attributing its early, modest rise in the session to an attempted recovery from selling in the precious metal and its sister commodity silver.
Precious metals registered sharply lower closes a day ago after the Commodity Futures Trading Commission and the CME Group said they would monitor and tighten restrictions on trade in silver, and gold, with dealers blaming individual investors for using social-media platforms like Reddit to drive futures prices in metals higher.
On Comex, April gold GC00, +0.30% GCJ21, +0.30% rose $6.80, or 0.4%, to $1,840.20 an ounce, after the metal tumbled 1.6%.
Silver futures for March delivery SIH21, +2.76% SI00, +2.76% were up 75 cents, or 2.9%, $27.155 an ounce, following an over 10% decline for futures.
Wednesday’s rebound, however, is viewed by some market strategists as limited by a firmer dollar and rising bond yields, which can serve as potential headwinds for the assets in the short term.
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“It will be interesting to see if the metal does actually break down because over the past few years it has been correlating positively with the stock markets,” wrote Fawad Razaqzada, analyst at ThinkMarkets, in a research note. “ In truth, a lot depends on the yields now,” he wrote.
The 10-year Treasury yield TMUBMUSD10Y, 1.120% was at around 1.12%, up over 2 basis points, while the dollar was up less than 0.1%, as gauged by the ICE U.S. Dollar Index DXY, -0.02%.
Higher rates and a stronger buck can undercut appetite for silver and gold, which don’t offer a coupon and are priced in U.S. dollars.
Bullish investors, however, make the case the accommodative policies to limit the economic harm from the COVID-19 pandemic will help to buoy gold prices in the longer term.
The economy in the U.S. was staging a recovery as highlighted by a private-sector reading from Automatic Data Processing that showed 174,000 jobs added in January, after shedding a revised 78,000 in the prior month.
Economists polled by The Wall Street Journal forecast a gain of 48,000 private sector jobs in January.
However, the pace of recovery is halting considering the millions of jobs that have been lost front the peak of the public health crisis.
