By Myra P. Saefong and Mark DeCambre
Gold prices ended lower on Tuesday, giving up early gains that followed downbeat U.S. economic data and an overall decline in global stock markets, with the precious metal posting a third straight decline as Treasury yields rose to levels not seen since 2020 and the dollar strengthened.
Gold fell with bond yields rising in the U.S. and Germany where bund yields are close to positive, for the first time in three years, James Hatzigiannis, chief market strategist at Ploutus Capital Advisors, told MarketWatch. “The combination of a rising dollar and rising yields make gold unattractive.”
Still, prices saw “a nice pop up after release of disappointing Empire State Manufacturing numbers,” said Hatzigiannis.
The Empire State survey of business conditions nosedived to -0.7 points in January from 31.9 in the prior month, the New York Federal Reserve said. It was the first decline in the index since June 2020. Economists had expected a reading of 25.5, according to a survey by The Wall Street Journal.
On Tuesday, February gold /zigman2/quotes/210034565/delayed GC00 +0.19% declined by $4.10, or 0.2%, to settle at $1,812.40 an ounce after trading as high as $1,822.40. The precious metal posted declines on Thursday and Friday, before Monday’s Martin Luther King, Jr. holiday, but still scored a 1.1% advance last week.
March silver /zigman2/quotes/210315219/delayed SI00 +0.03% , however, rose 57 cents, or 2.5%, to end at $23.492 an ounce, after gold’s sister metal climbed 2.3% last week.
Silver’s rise is a “technical rally,” said Chintan Karnani, director of research at Insignia Consultants. Prices rose as silver “managed to trade both over [the] 50-day moving average and 100-day moving average.”
Investing in gold in recent weeks has closely followed concerns about inflation and moves in the U.S. dollar, which the commodity has been pricing in.
Investors expect a surge in inflation will prompt the Federal Reserve to raise interest rates at least three times this year as it combats pricing pressures.
“Looking ahead, there are important inflation numbers we will be paying attention to this week from England, Canada, and Europe — also, U.S. housing demand numbers,” said Hatzigiannis.
“We believe gold will test the $1,800 level this week and our overall consensus is negative for the week, as we think inflation worries will just increase — causing interest rates to increase and a stronger dollar, which makes other safe haven assets more attractive,” he said.
Against that backdrop, the yield on the two-year Treasury note yield /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y +0.49% rose to 1.026%—around the highest level since February 2020 , with the short-term government debt tending to be the most sensitive to expectations for higher interest rates from the Federal Reserve.
Meanwhile, the benchmark 10-year Treasury note yields /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -0.55% climbed to as high as 1.857%, representing the highest level since about January 2020.
Rising yields can undercut appetite for nonyielding precious metals.
Separately, the dollar has gained 0.5%, as gauged by the ICE Dollar Index /zigman2/quotes/210598269/delayed DXY +0.15% , which measures the currency against a basket of a half-dozen others.
Changes in bond yields and the U.S. dollar index will continue to impact gold price until the Federal Reserve monetary policy meeting next week, said Insignia Consultants’ Karnani.
In other Comex trading, March copper lost 0.9% to $4.383 a pound.
April platinum tacked on 1.5% to $979.50 an ounce and March palladium climbed by 1.4% to $1,904.60 an ounce.