Gold futures are trading at their lowest levels in more than eight months, driven by another rally for the US dollar. The yellow metal, as well as the broader commodities market, has been hammered in recent sessions, despite inflation concerns and growing recession fears. Can anything happen to resuscitate gold prices?
August gold futures tumbled $1.50, or 0.09%, to $1,762.30 per ounce at 12:48 GMT on Wednesday on the COMEX division of the New York Mercantile Exchange. Gold has slumped nearly 5% over the last month, bringing its year-to-date performance to -3.84%.
Silver, the sister commodity to gold, has dropped to its lowest level in two years. August silver futures added $0.079, or 0.41%, to $19.20 per ounce. The white metal has cratered this year, falling 18% year-to-date.
The primary factor for the metals market is a stronger US dollar, says Jim Wyckoff, a senior analyst at Kitco.
“The metals continue to reel from a stronger U.S. dollar index that hit a 20-year high this week. The near-term technical charts for gold and silver are fully bearish, which is also prompting the technically based traders to play the short sides of the futures markets,” he wrote.
Indeed, the greenback has been on a tear, especially in the first two trading sessions of the week. The US Dollar Index (DXY), which measures the buck against a basket of currencies, surged again by 0.55% to 107.12, from an opening of 106.54. Year-to-date, the index is up close to 12%.
A strengthening greenback is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
The prospect of higher interest rates has weighed heavily on the bond market, although yields took a breather midweek.
The US Treasury market was red across the board, with the benchmark 10-year yield down 4.9 basis points to 2.762%. But the real story is that the two-year and ten-year yields inverted, with the former trading at 2.784%.
Gold is typically sensitive to a rising-rate environment because it lifts the opportunity cost of holding non-yielding bullion.
All eyes will be on the minutes from the Federal Reserve’s June Federal Open Market Committee (FOMC) policy meeting that will be released Wednesday afternoon.
In other metal markets, August copper futures edged up $0.0085, or 0.25%, to $3.4245 per pound. August platinum futures jumped $2.80, or 0.33%, to $853.50 an ounce. August palladium futures climbed $16.20, or 0.84%, to $1,935.00 per ounce.