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Gold Under Pressure from Rising US Dollar, Treasurys

Gold futures are trading relatively flat to end the trading week as a strengthening US dollar and mixed bond market weighed on the precious metal. Despite the lackluster movement in gold prices, the yellow metal is poised for its second straight weekly gain. Can gold find support for $1,750 toward the end of March?

April gold futures rose $2.60, or 0.15%, to $1.735.10 per ounce at 15:35 GMT on Friday on the COMEX division of the New York Mercantile Exchange. Gold is poised for a weekly boost of about 0.5%, paring its year-to-date loss to below 9%.

Silver, the sister commodity to gold, has struggled to remain in positive territory. May silver futures tumbled $0.126, or 0.48%, to $26.225 an ounce. The white metal will also settle the trading week with a gain of nearly 1%.

The metals market is mostly moving based on the greenback and bonds.

The US Dollar Index (DXY), which gauges the buck against a basket of currencies advanced 0.24% to 92.08, from an opening of 91.83. The index will post a weekly jump of 0.4%, adding to its YTD rally of 2.4%. A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.

Bonds have dominated finance headlines in recent weeks, with the benchmark 10-year Treasury climbing above a one-year high to 1.728%. The one-year bill dipped 0.008% to 0.063%, while the 30-year bond dropped 0.014% to 2.462%. Higher bonds are negative for non-yielding bullion since it raises the opportunity cost for investors.

Analysts at Commerzbank wrote in a research note:

The tug of war continues between rising bond yields (which are weighing on gold) and the nervousness on the stock markets (which is tending to lend support).

On Wednesday, the Federal Reserve completed its two-day Federal Open Market Committee (FOMC) policy meeting. It left interest rates and the quantitative easing program unchanged. The Fed also confirmed that discussing policy tightening was premature, adding that it will continue to support the economic recovery. The Eccles Building anticipates economic growth over the next three years and inflation to hit 2.59% within five years. The dot plot shows officials are split between a rate hike in 2022 and 2023.

Long-term gold prices are benefiting from inflation concerns. In addition to President Joe Biden’s $1.9 trillion coronavirus stimulus and relief package, Democratic leaders have been talking about another round of aggressive spending later this year.

In other metal markets, April copper futures slipped $0.016, or 0.39%, to $4.092 per pound. April platinum futures declined $30.20, or 2.48%, to $1,187.30 an ounce. April palladium futures plunged $41.30, or 1.55%, to $2,621.50 per ounce.

If you have any questions and comments on commodities today, use the form below to reply.

© AndrewMoran for Commodity News, 2021. | Permalink | No comment |
Published under: Gold

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