Gold resumes slipping as bond yields rise and dollar companies

Gold futures fell sharply on Wednesday as US government interest rates resumed rising and the dollar strengthened, pushing up precious metal prices.

The move comes a day after Gold gave its first win in six sessions.

“Gold once again ignores anything but these bond yields,” Fawad Razaqzada, a market analyst at ThinkMarkets, told MarketWatch. “As returns continue to rise, so does the ability to hold non-interest-bearing assets such as gold.”

“The precious metal needs returns to start falling back or the dollar to weaken sharply for some support,” he said.

Gold for delivery in April at Comex
GC00,
-1.08%

GCJ21,
-1.09%

fell $ 23.70, or 1.4%, to trade at $ 1,709.90 and hung around the lowest level of bullion since early June, FactSet data shows. The picture for the precious metal comes after the most active contract on Tuesday yielded a profit after five straight declines.

Analysts at UBS also make the case for higher nominal returns, with the 10-year government bond
TMUBMUSD10Y,
1.476%

to push up to 1.48% in Wednesday trading, and higher real returns, factoring for inflation, puts pressure on gold, which does not offer a coupon.

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

Analysts said they could predict that gold would bounce in the short term but grow more bearish to neutral in the longer term, given rising yields and expectations that further US fiscal stimulus will boost the economy and inflation.

“But we expect the recent headwinds to intensify again to 2H, especially as a larger US stimulus increases the prospects for an earlier-than-planned Fed rate hike,” the UBS analyst wrote.

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

On Wednesday, gold took slightly lower than after wage data from the private sector from automatic data processing, increased by 117,000 jobs in February after increasing by 195,000 the previous month. Economists polled by the Wall Street Journal had predicted a profit of 225,000 jobs in the private sector in February.

Gold prices showed little reaction to separate data showing the final reading of IHS Markit Services at 59.8 in February, compared to the initial 58.9, but the ISM service survey fell to 55.3% in February from 58.7%.

Meanwhile, May silver
SI00,
-2.36%

SIK21,
-2.36%

throw 71.4 cents, or 2.7%, to reach $ 26,165 per ounce, after a gain of nearly 0.8% on Tuesday.

May copper
HGK21,
-1.68%

throw 1.9% to $ 4,141 a pound. April platinum
PLJ21,
-2.46%

lost 2.6% to $ 1,183.20 per ounce and June palladium
PAM21,
-0.24%

decreased by 0.2% to $ 2,365 per ounce.

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