By Joy Wiltermuth and William Watts
Gold futures closed modestly higher to start the week after prices briefly drifted below the $1,800 an ounce threshold.
Gold for June delivery /zigman2/quotes/210034565/delayed GC00 +0.23% rose $5.80 or 0.3%, to settle at $1,814.00 an ounce on Comex, after dipping below $1,800 in trade on Monday and Friday. The precious metal logged a 3.9% fall last week, its largest since June 18, 2021, according to Dow Jones Market Data.
July silver /zigman2/quotes/210317804/delayed SIN22 -2.84% rose 2.6% to settle at $21.551 an ounce, with the most-active contract booking its best daily percentage gain since April 12. It fell 6.2% last week, its largest such slump since late January.
Gold “has been a victim of a strong U.S. dollar and rising bond yields, making this non-interest-bearing commodity less appealing for yield seekers. Its performance has surprised many market participants, us included,” said Fawad Razaqzada, market analyst at City Index and Forex.com, in a note.
Gold came off its session low Monday as the U.S. dollar came off early highs. The ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY -0.04% edged own 0.2% after trading near a 20-year high on Friday. A stronger dollar can be a negative for commodities priced in the unit, making them more expensive to users of other currencies.
Rising bond yields also have been a drag on gold. Treasury yields early last week traded near 3 1/2-year highs before pulling back. The benchmark 10-year Treasury rate /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +1.14% was down 5 basis points to start the week, around 2.88%, following a round of disappointing global economic data.
The New York Fed on Monday said its Empire State business conditions index, a gauge of manufacturing activity in the state, plummeted 36.2 points to negative 11.6 in May . Economists expected the index to fall slightly to a solid 16.5 reading, according to a survey by The Wall Street Journal.
“One month doesn’t make a trend and we look for healthy manufacturing activity through the rest of the year and into 2023,” Oren Klachkin, lead U.S. economist at Oxford Economics wrote, in a Monday note.
Economic data out of China also was weak, and a forecast of growth for the eurozone was cut to 2.7% for 2022 from an earlier 4% estimate.
Gold’s recent weakness, however, still has been a surprise given persistently hot inflation readings, as well as the volatility seen in equity and crypto markets, which would have been expected to spur some haven-related demand for gold, Razaqzada said.
“Those seeking to protect their wealth being eroded by inflation must be equally surprised to see the metal trade around $1,800,” he wrote. The most-active gold contract ended trade Monday 11.1% off its one-year high of $2,040.10 set in March, according to Dow Jones Market Data.
“While fundamentally I continue to remain positive towards gold, I just need to see a technical reversal pattern to confirm that prices have bottomed out. One such scenario would be if gold reclaims the broken trend line and goes back above $1850 resistance,” he said. “But first thing is first: it will need to defend support around $1800.”
In other metals trade, July copper /zigman2/quotes/210057814/delayed HGN22 +0.86% advanced 0.4% to close at $4.1915 a pound.
July platinum /zigman2/quotes/226441303/delayed PLN22 -0.72% fell 0.6% to settle at $925.30 an ounce, while June palladium jumped 4.4% to end at $2,002.60 an ounce.