Gold, Silver Plunge on a Soaring DXY, Rising Short-Term Yields

Gold futures cratered to close out the volatile trading week, driven by a skyrocketing US dollar and rising Treasury yields. The yellow metal has plunged amid the Federal Reserve’s tightening cycle and it has continued struggling on the expectation that the central bank will continue raising interest rates.

October gold futures declined $25.50, or 1.52%, to $1,655.60 per ounce at 13:33 GMT on Friday on the COMEX division of the New York Mercantile Exchange. Gold prices will post a weekly loss of about 1.1%, adding to their year-to-date drop of nearly 10%.

Silver, the sister commodity to gold, crashed below $19 to end the trading week. November silver futures tumbled $0.707, or 3.60%, to $18.91 an ounce. The white metal will post a weekly loss of about 1.4%, adding to its 2022 drop of more than 19%.

The big story on Friday was the spike in the greenback and the Treasury yields.

The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, surged 1.28% to 112.78, from an opening of 111.35. The index recorded a weekly gain of nearly 3% and is up close to 18% year-to-date.

A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.

The US Treasury market was mostly mixed on Friday, wth the benchmark ten-year yield down 2.9 basis points to 3.679%. The one-year bill added 4.2 basis points, while the 30-year bond shed 4.3 basis ponts. The recession-indicating spread between the two- and ten-year yields widened beyond -50 basis points.

A rising-rate environment is bearish for gold because it lifts the opportunity cost of holding non-yielding bullion.

“The pressure gold is coming under in the current macroeconomic environment, with interest rates going up across the world and likely to continue doing so for a number of months yet, means it is hard to see how the metal can make gains with the question more about how low it will go,” said Rupert Rowling, market analyst at Kinesis Money, in a note.

Gold experts point out, however, that the precious metal is firm in every currency except for the buck.

Meanwhile, financial markets will be paying attention to the threat of nuclear weapons by Russian President Vladimir Putin.

In other metal commodities, October copper futures plummeted $0.123, or 3.54%, to $3.348 per pound. October platinum futures fell $48.00, or 5.3%, to $858.00 an ounce. November palladium futures crashed $109.30, or 5.03%, to $2,065.50 per ounce.

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