Gold is cratering to kick off the trading week on a soaring US dollar and Federal Reserve Chair Jerome Powell being given another term as head of the world’s most powerful institution. This is another example of the roller coaster ride that gold markets have endured in 2021.
December gold futures plummeted $38.10, or 2.06%, to $1,813.50 per ounce at 13:42 GMT on Monday on the COMEX division of the New York Mercantile Exchange. Gold prices shed about 2% last week, but they are still on track to record a tepid monthly gain of 0.65%. Year-to-date, gold is still down more than 4%.
Silver, the sister commodity to gold, is also sinking to start the trading week. January silver futures crashed $0.421, or 1.7%, to $24.36 per ounce. The white metal fell 3% last week and it is poised for a November decline of about 1%. Year-to-date, silver prices have slumped more than 8%.
On Monday, President Joe Biden announced that he would tap Powell for a second term at the US central bank. He also confirmed that he would select Lael Brainard as the Vice Chair of the Fed.
“As I’ve said before, we can’t just return to where we were before the pandemic, we need to build our economy back better, and I’m confident that Chair Powell and Dr. Brainard’s focus on keeping inflation low, prices stable, and delivering full employment will make our economy stronger than ever before,” Biden said in a statement.
The nominations will now head to the Senate for confirmation.
This announcement supported the stock market as now investors may not need to handle a different approach to monetary policy. It also lifted the US dollar to its highest level in more than a year on Monday.
The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, surged 0.44% to 96.45, from an opening of 96.04. The index has been one of the hottest currencies in 2021, rising about 7.25% year-to-date. A stronger buck is bearish for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.
“The key outside markets today see the U.S. dollar index slightly higher and not far below last week’s 15-month high,” wrote Jim Wyckoff, senior analyst at Kitco.com, in a daily note.
The US Treasury market was a sea of green across the board, with the benchmark 10-year bond up 0.05% to 1.586%. The one-year bill added 0.018% to 0.175%, while the 30-year bond picked up 0.031% to 1.938%. A rising-rate environment is also bad for metals because it increases the opportunity cost of holding non-yielding bullion.
In other metal markets, December copper futures slid $0.031, or 0.7%, to $4.377 per pound. December platinum futures dropped $7.00, or 0.68%, to $1,029.00 an ounce. January palladium futures shed $31.20, or 1.5%, to $2,042.00 per ounce.