By Myra P. Saefong and Mark DeCambre
Gold futures ended higher Tuesday, on the heels of a five-session decline that pushed prices to their lowest level in over eight months.
“Gold’s beatdown might be over” now that the global outlook might be showing some weak points, said Edward Moya, senior market analyst at Oanda. The global bond market selloff could very well resume, but “central banks are lining up to voice their concern over surging bond yields,” he said.
The Reserve Bank of Australia earlier in the week doubled down on their asset purchases and the European Central Bank’s Executive Board member Fabio Panetta on Tuesday noted that a “steeper nominal yield curve must be resisted,” Moya said. If the U.S. Federal Reserve “clearly signals they are in agreement with the other central banks, gold could easily get its groove back.”
All in all, “gold’s last major selloff could be behind us or one last plunge towards the $1,650 level could be needed to attract long-term institutional investors,” said Moya.
Gold for April delivery on Comex /zigman2/quotes/210034565/delayed GC00 +0.90% /zigman2/quotes/212606756/delayed GCJ21 +0.95% rose $10.60, or 0.6%, to settle at $1,733.60 an ounce, after trading as low as $1,704.60. On Monday, prices based on the most-active contract posted a fifth-straight session decline and marked the lowest finish since June 2020, FactSet data show.
Markets have been fixated on a move in bond yields, which have weighed on appetite for stocks and gold because it forces investors to assess the relative value of those assets against a regime of richer yields and rising corporate borrowing costs.
The Fed has suggested yield moves reflect upbeat expectations for an economic recovery fueled by the vaccine program and the likelihood of additional fiscal stimulus.
However, when it comes to trading gold, it’s important to investors to pay attention to is “not so much nominal yields but real yields,” Frank Holmes, chief executive officer of U.S. Global Investors, wrote in his blog on Monday .
Right now the U.S. 10-year bond is trading with a yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -0.05% of 1.4%, which is the exact same rate that consumer prices rose at in January year-over-year, according to the Bureau of Labor Statistics, he said, “so in reality, inflation is eating your lunch even with the yield increase.”
“I expect gold to catch a bid when consumer prices really start to turn up on additional stimulus,” said Holmes. “Until then, I see now as an attractive time to buy.”
In other metals, May silver /zigman2/quotes/213039318/delayed SIK21 +3.06% /zigman2/quotes/210315219/delayed SI00 +3.06% added 20 cents, or nearly 0.8%, at $26.879 an ounce, after a 0.9% gain in the previous session.
May copper /zigman2/quotes/210056589/delayed HGK21 +1.73% added nearly 2.7% to $4.222 a pound. April platinum /zigman2/quotes/216224626/delayed PLJ21 -1.28% tacked on 1.9% to $1,214.40 an ounce and June palladium /zigman2/quotes/217647915/delayed PAM21 +4.41% rose 0.8% to $2,368.60 an ounce.