Gold futures tanked below $1,900 in the middle of the trading week, driven by a skyrocketing US dollar and rising Treasury yields. The yellow metal has struggled over the past month on tighter monetary policy, and prices could sink further if the Federal Reserve pulls the trigger on one more rate hike by the year’s end.
December gold futures plunged $25.40, or 1.32%, to $1,894.40 per ounce at 17:12 GMT on Wednesday on the COMEX division of the New York Mercantile Exchange. Gold prices are down nearly 3% this week and have slumped close to 4% this month. Year-to-date, the precious metal is up just 3.4% after surging as much as 10%.
Silver, the sister commodity to gold, dropped below $23 again midweek. November silver futures declined $0.421, or 1.81%, to $22.775 an ounce. The white metal has already fallen 3% this week and is down more than 7% this month. Year-to-date, silver prices have tumbled about 6%.
A strengthening greenback was behind the sliding metals market.
The US Dollar Index (DXY), a gauge of the greenback against a basket of currencies, advanced 0.39% to 106.65, from an opening of 106.22. The index is up 1.3% this week and has climbed 3% year-to-date.
A stronger buck makes dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.
US Treasury yields were mostly up across the board, with the benchmark ten-year yield rising five basis points to 4.607%, the highest level in ten years. The two-year yield tacked on 5.4 basis points to 5.131%, while the 30-year bond picked up 2.7 basis points to 4.723%.
Gold is typically sensitive to movements in interest rates because it can influence the opportunity cost of holding non-yielding bullion.
For gold investors, all eyes will be on the Federal Reserve’s preferred inflation measurement: the personal consumption expenditures (PCE) price index. This metric will be published on Friday and is expected to jump again.
In other metal commodities, November copper futures dipped $0.01, or 0.25%, to $3.64 per pound. November platinum futures dropped $22.00, or 2.43%, to $885.10 an ounce. November palladium futures were flat at $1,226.00 per ounce.