By Myra P. Saefong and Mark DeCambre
Gold futures ended below the $1,700 mark, with prices for the precious metal posting a third straight weekly loss.
The U.S. dollar index touched its highest level in over three months and Treasury yields briefly topped 1.6% as the latest employment report showed a larger-than-expected job gains in February.
Higher government bond yields and a stronger dollar can make gold less attractive to investors seeking a safe-haven.
Gold has been pressured by “a continued increase in interest rates, making the metal a less attractive store of value relative to bonds,” Jason Teed, co-portfolio manager of the Gold Bullion Strategy Fund (NAS:QGLDX) , told MarketWatch. While inflation was mentioned by the Federal Reserve this week, “the interest rate pressure is likely a larger and nearer-term factor than the positive pressure of expected inflation.”
If interest rates continue to move up on positive U.S. economic news, gold may continue to come under some selling pressure, but that pressure may “abate somewhat if yield movements take a breather,” said Teed.
Gold for April delivery on Comex (NYM:GC00) fell $2.20, or 0.1%, to settle at $1,698.50 an ounce, after it lost 0.9% on Thursday. Prices for the most-active contract ended at their lowest since June 5, FactSet data show.
May silver futures (NYM:SI00) (NYM:SIK21) , meanwhile, lost 17 cents, or 0.7%, to $25.287 an ounce, after tumbling 3.5% in the previous session.
For the week, gold suffered a 1.8% decline based on the most-active contract, and silver futures saw a 4.5% weekly skid.
“Markets have become increasingly jittery over the prospects of economic growth leading to higher inflation and resulting in the Federal Reserve raising interest rates,” Lukman Otunuga, senior research analyst at FXTM, told MarketWatch. “Given gold’s zero-yielding nature, this development does not bode well for the blowout U.S. jobs report for February likely to rub salt into the wound.”
“Treasury yields are already pushing higher, surpassing the February 26th peak, which is bad news for the precious metal” he said.
The Labor Department indicated the U.S. created 379,000 new jobs in February —the biggest gain in four months, perhaps undercutting some appetite for bullion as the economy looks to be on the recovery path from the COVID-19 pandemic.
On Thursday, markets keyed off comments from Federal Reserve Chairman Jerome Powell, who said he would be concerned about a disorderly move in the bond market, but suggested that hadn’t yet had a material impact on financial conditions, disappointing some market participants who wanted him to offer more insights about tactics the central bank might employ to tamp down a rise in yields.
Instead, Powell’s comments, during a Wall Street Journal webinar, were credited with sparking a rise in the dollar and a sharp rise in bond yields.
Those factors delivered another blow to bullion and precious metals, which had already been under pressure.
“There is a moderate switch in investors’ portfolios, with bonds gaining quota, while interest for gold is temporarily decreasing, despite a dovish speech by Jerome Powell,” wrote Carlo Alberto De Casa, chief analyst at ActivTrades in a research note.
“The technical scenario for gold remains bearish, and so far there are no signs of an imminent rebound,” he wrote.
“Technically, the April gold futures bears have the solid overall near-term technical advantage amid a two-month-old price downtrend in place on the daily chart,” wrote Wyckoff.
“Bulls’ next upside price objective is to produce a close in April futures above solid resistance at this week’s high of $1,757.40, the analyst said.
Meanwhile, the 10-year Treasury note (XTUP:BX:TMUBMUSD10Y) was trading around 1.55% after a high at 1.612% , while the U.S. dollar, as gauged by the ICE U.S. Dollar Index (IFUS:DXY) , touched a high of 92.192, the highest level since around November, FactSet data show.
Among other Comex metals, May copper (NYM:HGK21) rose 2.4% to $4.0755 a pound, paring its weekly loss to around 0.3%. April platinum shed 0.6% to $1,128.30 an ounce, ending around 4.8% lower on the week. June palladium (NYM:PAM21) settled at $2,329.10 an ounce, down 0.6% for the session, but registering a weekly rise of 0.7%.