Gold futures headed lower Tuesday, as government bond yields and the US. dollar rose, putting pressure on the metal that has gained in the month and quarter against the backdrop of the COVID-19 pandemic.
Losses for gold came on the back of the latest U.S. consumer confidence data, which showed a decline in March, but came in better than the market expected.
An index of consumer confidence fell to 120 in March, from a revised 132.6 in February, but some forecasts called for a fall to 115.
The data was “much better than the forecast…and this has triggered the sell-off for the gold price,” said Naeem Aslam, chief market analyst at AvaTrade. “But we are still deep in the woods and the number which matters the most for the markets is the US ISM manufacturing number” due Wednesday. See the U.S. economic calendar.
For now, “if the gold price drops below the $ 1,600, it will be an opportunity to load more gold in your portfolio,” Aslam told MarketWatch.
June gold GCM20, -1.16% on Comex was off $ 22.30, or 1.4%, at $ 1,620.90 an ounce, after falling 0.7% on Monday. For the month, the most-active contract has advanced 3.1% thus far, and is on pace for a return for the first quarter of 5.5%, according to FactSet data.
Trading for precious metals has been marked by concerns about the rapidly moving infection, COVID-19, which was first identified in Wuhan, China in December, but has infected more than 800,000 people and claimed nearly 39,000 lives world-wide, as of Tuesday morning, according to data aggregated by Johns Hopkins University.
The pandemic has shutdown business activity in swaths of America and elsewhere throughout the globe, driving investors to the perceived safety of gold during the period, but the uncertainty about the duration of the illness and the severity of its impact on global economies has made for bumpy trade in gold. Meanwhile, silver futures, which are also viewed as an industrial metal, has been weighed by the prospect of slowing economic expansion in the world.
On Tuesday, however, investors took some comfort in data out of China reflecting signs of a modest economic rebound. China’s manufacturing gauge for the March official purchasing managers survey rose to 52, from a record low of 35.7 in the previous month as factories resumed work following monthslong shutdown.
Meanwhile, gold was under pressure from strength in the U.S. dollar, which most commodities are priced in. A measure of the dollar was gaining strength against a basket of a half-dozen currencies, the ICE U.S. Dollar Index DXY, +0.12% was up 0.3% on Tuesday. The currency index has been up 1.4% for the month and 3.2% for the quarter. A stronger dollar can make assets priced in the currency comparatively more expensive for buyers using other monetary units.
Rising bonds yields have drawn also some demand away from gold, which doesn’t offer a yield. The 10-year Treasury note yield TMUBMUSD10Y, -3.96% was at 0.681% from 0.667% Monday afternoon, according to Dow Jones Market Data.
Gold “should remain confined in a narrow range until there is a fresh directional catalyst,” wrote Lukman Otunuga, senior sesearch analyst at FXTM, in a Tuesday research note.
The analyst wrote that “should the dollar regain its footing on risk aversion and global recession fears, this may hinder gold’s upside potential.”
May silver SIK20, +1.05%, meanwhile, added 12.8 cents, or 0.9%, at $ 14.26 an ounce, after declining 2.8% on the prior day. Thus far in March, gold’s sister metal has lost more than 13%, with a quarterly decline of nearly 21% in sight.
May copper HGK20, +3.02% rose 2.6% to $ 2.212 a pound, trading about 13% lower for the month. July platinum PLN20, +1.63% rose 1.3% to $ 733.30 an ounce, poised for a monthly decline of almost 16%, while June palladium PAM20, +5.52% added 6.6% to $ 2,343 an ounce, paring its monthly loss to 6%.
