By Myra P. Saefong and Joseph Adinolfi
Gold and silver prices finished lower on Wednesday, a day after marking their highest levels in three weeks and three months, respectively. Analysts blamed a rise in Treasury yields and the dollar for the pullback in precious metals.
Gold for December delivery /zigman2/quotes/210039381/delayed GCZ23 +0.12% fell $9.70, or 0.6%, to settle at $1,720.80 an ounce on Comex after gaining 1.7% on Tuesday to settle at $1,730.50, the highest finish for a most-active contract in roughly three weeks.
December silver /zigman2/quotes/210319410/delayed SIZ22 +1.54% fell 55 cents, or 2.6%, to $20.544 an ounce. Tuesday’s settlement at $21.099 was the highest since late June.
December palladium /zigman2/quotes/229904593/delayed PAZ22 +0.05% was down 3.2% at 2,255.90 an ounce, while January platinum /zigman2/quotes/230581331/delayed PLF23 +0.09% fell nearly 2.1% to $914.60 an ounce.
December copper /zigman2/quotes/210059544/delayed HGZ22 +0.67% added 0.3% to $3.5005 a pound.
While gold and silver have rallied sharply over the last couple of sessions, precious metals analysts expect that this move upward has now run out of steam, and will require lower Treasury yields and a softer dollar for it to continue.
“We’ve seen a strong recovery in the gold price over the last couple of days but it may need another helping hand to build on that. That will likely require the assistance of lower U.S. yields and a softer dollar which will depend heavily on the incoming data, most notably Friday’s jobs report,” said Craig Erlam, senior market analyst at OANDA.
Treasury yields rose and the dollar gained ground Wednesday after a sharp two-day pullback for both. Soaring yields and a stronger dollar sank gold and other commodities, while also keeping pressure on equities in September.
The 10-year Treasury yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +1.82% jumped 15 basis points in Wednesday dealings to 3.769%, while the ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY -0.30% rose 1.1%.
Meanwhile, data released Wednesday showed that private-sector payrolls rose by 208,000 in September, indicating steady growth and supporting the view that the Fed has enough scope to keep raising interest rates. Economists surveyed by The Wall Street Journal had expected a rise of 200,000.
The Labor Department will release the official September jobs report on Friday.
An ISM barometer of U.S. business conditions at companies such as hotels and restaurants dipped to 56.7% in September. Yet the survey also showed steady growth and rising employment in a sign the economy is still expanding.
Gold prices faltered from the highs seen in the first quarter of this year, with the impetus behind the move lower “mainly the aggressive tightening policy of the U.S. Federal Reserve Bank,” said Jeff Klearman, Portfolio Manager at GraniteShares which runs the GraniteShares Gold Trust /zigman2/quotes/208448147/composite BAR +0.06% . The Fed has “acted forcefully…raising rates at an almost unprecedented pace, while being persistent in delivering its hawkish, inflation-fighting message.”
As a result, the the U.S. dollar soared to 20-year highs and U.S. interest rates have reached levels not seen in almost a decade and a half — leading gold prices to move significantly lower, he said in emailed commentary. Year to date, gold futures trade more than 6% lower.
But the “dynamic has changed recently,” with both the Bank of England and European Central Bank increasing their “inflation-fighting rhetoric.” They have “pushed rates higher at historically high clips or — as in the case of the ECB — for the first time ever.”
The actions have begun to relieve upward pressure on the U.S. dollar, “a bullish result for gold prices,” said Klearman. Gold futures trade higher so far for the week.