Metals Stocks: Gold ends near a 9-month low as bond yields rise and dollar firms

United States

Gold futures fell Wednesday to end the session at their lowest in nearly nine months, as U.S. Treasury yields resumed their rise and the dollar firmed, pressuring prices for the precious metal.

The move comes a day after gold posted its first gain in six sessions.

“Gold is once again ignoring everything else but those bond yields,” Fawad Razaqzada, market analyst at ThinkMarkets, told MarketWatch. “As yields continue to rise, so do the opportunity cost of holding non-interest-bearing assets like gold.”

“The precious metal needs yields to start dropping back or the dollar to weaken sharply for it to find some support,” he said.

Gold for April delivery on Comex GC00, -1.02% GCJ21, -1.02% lost $ 17.80, or 1%, to settle at $ 1,715.80 an ounce after touching an intraday low at $ 1,699.40. The settlement was the lowest for a most-active contract since June 8, FactSet data show. The slide for the precious metal follows a gain in prices on Tuesday after five straight declines.

Analysts at UBS also made the case that higher nominal yields, with the 10-year Treasury note TMUBMUSD10Y, 1.472% as high as 1.498% in Wednesday dealings, and higher real yields, factoring for inflation, are putting pressure on gold, which doesn’t offer a coupon.

“Higher nominal and real US bond yields have hurt gold recently, while ongoing ETF outflows should remain the key challenge for this year,” wrote UBS strategists in a note dated March 2, referring also to monthly data showing that gold via exchange-traded funds is being sold heavily.

The analysts said that they could foresee gold scoring a bounce in the shorter run but are growing more bearish to neutral on the asset in the longer term, against a backdrop of rising yields and expectations that further U.S. fiscal stimulus will boost the economy and inflation.

“But we anticipate recent headwinds to intensify again into 2H, particularly as greater US stimulus raises the prospect of an earlier-than-planned Fed rate hike,” wrote the UBS analyst.

For that reason, UBS has lowered its gold forecasts by $ 150 per ounce,
bringing end-June to $ 1,750, end-September to $ 1,700, and end-December and end-March 2022 to $ 1,650.

On Wednesday, gold took a slight leg lower after private-sector payroll data from Automatic Data Processing, rose by 117,000 jobs in February after increasing 195,000 in the prior month. Economists polled by the Wall Street Journal had forecast a gain of 225,000 private sector jobs in February.

Gold prices showed little reaction to separate data showing the final IHS Markit Services reading at 59.8 in February, up from an initial 58.9, but the ISM services survey fell to a nine-month low of 55.3% in February from a two-year high of 58.7% in January.

Meanwhile, May silver SI00, -2.04% SIK21, -2.04% shed 49 cents, or 1.8%, to settle at $ 26.387 an ounce, following a nearly 0.8% gain on Tuesday.

May copper HGK21, -1.79% shed 1.9% to $ 4.142 a pound. April platinum PLJ21, -2.63% lost 2.7% to $ 1,181.80 an ounce and June palladium PAM21, -0.57% edged down by 0.6% to $ 2,354.40 an ounce.