Gold futures plummeted below $2,000 to kick off the trading week, with the yellow metal continuing to be in retreat after hitting a record high. Gold prices have slumped more than 2.5% in the last week but remain up on the year, thanks to expectations that the Federal Reserve will loosen monetary policy. Will gold maintain its selloff?
February gold futures tumbled $17.80, or 0.88%, to $1,996.70 per ounce at 18:00 GMT on Monday on the COMEX division of the New York Mercantile Exchange. So far this month, gold is up 2.3% and has risen 9% year-to-date.
Silver, the sister commodity to gold, continued heading toward $23. January silver futures dropped $0.096, or 0.41%, to $23.18 an ounce. The white metal has plunged 7% over the last week and is down 4% year-to-date.
After hitting a record high of above $2,100 earlier this month, gold has been in freefall, fueled by investors taking profits and a strengthening greenback. Although expectations are that the Federal Reserve will cut interest rates early next year, gold is potentially searching for the next catalyst to ignite another rally.
The futures market is penciling in a rate pause at this month’s Federal Open Market Committee (FOMC) policy meeting and then a rate cut as early as March.
US Treasury yields were mixed to start the trading week, with the benchmark ten-year yield unchanged at 4.245%. The two-year yield added half a basis point to 4.731%, while the 30-year bond was flat at 4.33%.
Gold is sensitive to movements in interest rates because it influences the opportunity cost of holding non-yielding bullion.
The US Dollar Index (DXY), a gauge of the greenback against a basket of currencies, firmed slightly above 104.00 on Monday. The index is up 0.55% year-to-date and has declined 1.5% over the past month.
A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
Gold could still be headed downward because the relative strength index (RSI) is at around 45, which is considered to be in neutral territory. Anything above 70 indicates overbought conditions, while a level below 30 suggests oversold.
In other metal markets, January copper futures fell $0.044, or 1.15%, to $3.7865 per pound. January platinum futures slipped $2.30, or 0.25%, to $917.50 an ounce. January palladium futures advanced $16.40, or 1.72%, to $968.00 per ounce.