Gold futures cratered on Thursday as a stronger US dollar and soaring Treasury yields weighed on the metals market. Gold gained momentum in August, but the yellow metal faces a series of headwinds that could be hard for commodities to overcome.
December gold futures declined $80.60, or 1.81%, to $4,379.90 per ounce at 18:40 GT on Thursday on the COMEX division of the New York Mercantile Exchange. Gold is poised for a weekly loss of 3% but is still up about 1% year-to-date.
Silver, the sister commodity to gold, fell below $65 toward the end of the trading week. October silver futures erased $4.256, or 6.2%, to $64.39 an ounce. The white metal is also down nearly 5% this week and has slumped more than 9% this year.
The Bureau of Labor Statistics released the August Producer Price Index (PPI), a key gauge of prices businesses pay for goods and services and will pass on to consumers.
Last month, producer inflation climbed 0.4%, driven primarily by diesel costs and other energy inputs. Core wholesale inflation, which omits the volatile energy and food prices, edged higher by just 0.2%.
Attention turns to September 11, when the bureau publishes the August Consumer Price Index (CPI) data. The consensus estimate suggests annual inflation will remain unchanged at 3.4%, while core inflation will ease to 2.4%.
Elevated inflation has pushed up expectations that the Federal Reserve will raise interest rates at next week’s policy meeting.
Futures markets are betting on a 64% chance of a rate hike, and the two-year Treasury yield, which is more sensitive to monetary policy forecasts, is pricing in three rate hikes.
Higher interest rates add to the opportunity cost of holding non-yielding bullion.
This has strengthened the greenback as the US Dollar Index (DXY) climbed 0.23% to 99.04, from an opening of 98.76. The index is on track for a weekly gain of 0.1%and is up more than 0.7% this year.
A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
In other metal markets, October copper futures crashed $0.38, or 5.5%, to $6.509 per pound. October platinum futures plummeted $131.50, or 6.85%, to $1,787.50 per ounce. October palladium futures dropped $88.00, or 6.37%, to $1,293.00 an ounce.