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Gold futures headed sharply lower Tuesday, with bullion on track for its lowest level since mid April and its worst monthly decline since 2013. Weighing on bullion on the session was a pickup in yields for government debt and firmness in the U.S. dollar.
A gauge of the U.S. dollar, the ICE U.S. Dollar Index
DXY,
was trading 0.2% higher, while the 10-year Treasury note yield
TMUBMUSD10Y,
was up near 1.50%.
A stronger greenback can make dollar-pegged precious metals more expensive to overseas buyers, while higher bond yields can raise the opportunity costs of buying Treasurys versus gold and silver which don’t offer a yield.
August gold
GCQ21,
GC00,
slumped $26, or 1.5%, at $1,754.40 an ounce, after bullion climbed 0.2% on Comex on Monday. At its current level, the yellow metal’s price is around its lowest since mid April, FactSet data show. Presently, gold is looking at a monthly decline, based on the most-active contract, of about 8%, which would mark its worst monthly decline since 2013.
July silver
SIN21,
SI00,
was trading 49 cents, or 1.9%, lower to around $25.74 an ounce, following a 0.5% gain a day ago.
Investors remain focused on the Federal Reserve and the central bank’s outlook for inflation in the recovery phase of the U.S. economy from COVID-19.
The outlook for gold is complicated by the Fed’s view that higher inflation is temporary and a rise in interest rates will only happen slowly and probably not until late 2022. Gold tends to benefit from rising inflation and lower interest rates.
“The markets appear increasingly unsettled by the Fed’s taboo on inflation, with a growing number of investors taking a net view that the central bank’s ambiguity, mixing a new hawkish stance with dovish declarations from some officials, will ultimately translate into higher interest rates sooner than previously expected,” wrote Ricardo Evangelista, senior analyst at ActivTrades, in a Tuesday note.
Evangelista projects that such a scenario will underpin the dollar and provide more turbulence for bullion, which could “therefore, generate more short-term losses for gold.”
Elsewhere on Comex, October platinum
PLV21,
was down $29.90, or 2.7%, at $1,069.10 an ounce, after shedding 0.5% on Monday. September palladium
PAU21,
shed 1%, or $27.90, at $2,671.50 an ounce, after rising 2.4% a day ago.
The most-active September copper contract
PAU21,
was trading 4 cents, or 0.8%, lower to around $4.244 a pound, following a 0.3% decline on Monday.
