By Myra P. Saefong and Mark DeCambre
Gold futures ended higher Wednesday, marking a partial rebound from losses in the previous session, buoyed by uncertainty around the impact of the omicron variant of coronavirus, as the dollar weakened, and yields for government bonds moved lower.
The dollar easing in recent days and the huge amount of uncertainty in the markets should be giving gold a lift, but then near-term Treasury yields have been rising as the Federal Reserve “has accepted more action may be necessary,” said Craig Erlam, senior market analyst at Oanda, in a market update.
Fed Chairman Jerome Powell on Tuesday surprised market participants by testifying in front of a Senate Banking Committee that speeding the tapering of monthly asset purchases when policy makers meet later this month could be warranted amid the new strain of the coronavirus.
Powell’s remarks on Tuesday “were already priced in by the market and the Fed is always behind the curve anyway,” said Fawad Razaqzada, market analyst at ThinkMarkets.
The most active February gold contract /zigman2/quotes/217725591/delayed GCG22 +0.10% /zigman2/quotes/210034565/delayed GC00 +0.10% tacked on $7.80, or 0.4%, to settle at $1,784.30 an ounce, following a 0.5% decline on Tuesday, which contributed to a monthly decline of 0.4% in November, according to Dow Jones Market Data.
Silver futures extended their loss from Tuesday, however, with the March silver contract /zigman2/quotes/218218251/delayed SIH22 +0.80% down 48 cents, or 2.1%, at $22.339 an ounce.
Powell on Tuesday said the central bank “consider wrapping up the taper of our asset purchases… perhaps a few months sooner,” as the threat of persistently higher inflation has grown and that it is time to retire the word “transitory.”
“Yields spiked on the back of his comments and the dollar surged back higher, gold dumped to a fresh weekly low, and stocks that carry low dividend yield in the technology sector slumped,” said Razaqzada, in a market update. But on Wednesday, “all those moves were reversed amid a firmer tone towards risk.” U.S. benchmark stock indexes traded broadly higher Wednesday .
In his second day of testimony before lawmakers, Powell said the central bank’s plan to slow and end its asset purchases should not disrupt financial markets.
Monetary policy makers meet on Dec. 14-15 for their final rate-setting gathering of 2021.
Financial markets have been whipsawed by concerns about the omicron variant, which may have caused some selling of safe-haven metals, presumably, to meet margin calls.
“There remains a bit of safe-haven demand for the precious metals as there is still some uncertainty and anxiety in the marketplace,” said Jim Wyckoff, senior analyst at Kitco.com.
On Wednesday, the dollar was trading slightly lower, as gauged by the ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY +0.24% , which was at 95.966, trading 0.1% lower for the week. Meanwhile the 10-year Treasury note yields /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.46% around 1.435%, down a bit from 1.44% at 3 p.m. Eastern Tuesday.
Changes in the dollar and Treasury yields can influence gold because the metal is priced in U.S. dollars and doesn’t bear any interest.
Meanwhile, in economic data, Automatic Data Processing Inc. /zigman2/quotes/207661132/composite ADP +0.51% indicated that private-sector employers added 534,000 jobs in November, better than a median forecast of 506,000 from economists surveyed by Dow Jones but down from the previous reading in October of 571,000.
Gold prices continued to trade higher after a key index of U.S.-based manufacturers rose to 61.1% in November from 60.8% in the prior month, according to the Institute for Supply Management. That matched the forecast of economists polled by The Wall Street Journal.
Among other metals traded on Comex, March copper /zigman2/quotes/210055645/delayed HGH22 +1.09% shed 0.8% to $4.248 a pound. January platinum /zigman2/quotes/222209103/delayed PLF22 -1.47% added nearly 0.9% to $935.20 an ounce and March palladium /zigman2/quotes/223562561/delayed PAH22 -0.26% settled at $1,753.50 an ounce, up 2.8%.