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Gold futures settled sharply lower Thursday, marking the steepest daily slump for the precious metal in over six weeks, a day after minutes from the Federal Reserve’s December gathering showed that officials thought rate increases could come sooner and possibly at a faster pace then they previously expected as inflation runs hot.
Inflation is usually a boon for bullion but the prospect of higher rates is dulling the appeal of nonyielding precious metals against Treasury yields, which also are being sold and consequently seeing rates rise.
February gold
GCG22,
GC00,
was trading $35.90, or 2%, lower to finish at $1,789.20 an ounce, after rising 0.6% in regular trade on Wednesday, with the asset knifing below $1,800, often viewed as a psychological support level for the yellow metal.
Investors need to “see is a sharp drop in inflation to deter the Fed from tightening too fast,” wrote Fawad Razaqzada, market analyst at ThinkMarkets.com, in a daily note. But if that doesn’t happen, he expects “further struggles” down the line.
“Gold just can’t catch a break,” he continued.
“The metal was unable to break above that $1830 key resistance level, he noted and said that gold bulls need to see a clean break above $1830 to tip the balance back in” the favor of buyers, the ThinkMarkets analyst wrote.
The Federal Open Market Committee minutes from the December meeting, which came about a half-hour after gold futures prices settled Wednesday, also indicated that policy makers may be more inclined to take a more aggressive tack in winding down the central bank’s $8.9 trillion balance sheet than the last time it reduced it.
The minutes have helped to drive selling in bonds, with the heightened expectation of tighter financial conditions on the horizon and the possibility that at least three rate increases could result from Fed deliberations this year.
Against that backdrop, Treasury yields popped higher, with the 10-year Treasury note BX
TMUBMUSD10Y,
rising to around the highest rate since March at 1.73%.
Investors on Thursday sifted through weekly jobless claims, which climbed 7,000 to 207,000 in the week ended Jan. 1 and data on the U.S. trade deficit widened to $80.2 billion in November from $67.2 billion in the prior month.
Meanwhile, March silver
SIH22,
SI00,
was trading 98 cents, or 4.2%, lower to close at $22.19 an ounce, following a 0.5% climb a day ago for gold’s sister metal.
Elsewhere on Comex, April platinum
PLJ22,
shed $41.20, or 4.1%, to reach $960.70 an ounce, following a 3.2% gain on Wednesday; while, palladium for March delivery
PAH22,
lost $28.70, or 1.5%, to settle at $1,873.90 an ounce, after advancing 2.3% a day ago.
Industrial metal copper also fell, with the March contract
HGH22,
down 5.9 cents, or 1.3%, to close at $4.3545 a pound, following a 1.4% slump on Wednesday.
