Gold futures are soaring midweek, buoyed by a weaker US dollar and slumping Treasury yields. Gold prices have enjoyed a decent start to 2022, despite many market experts suggesting that the yellow metal will endure a bear market this year amid monetary policy normalization. Can gold prices sustain the momentum or fall?
February gold futures advanced $29.10, or 1.61%, to $1,841.50 per ounce at 17:23 GMT on Wednesday on the COMEX division of the New York Mercantile Exchange. The yellow metal is up more than 2% this week, lifting its year-to-date gain to 0.6%.
Silver, the sister commodity to gold, is also rallying in the middle of the trading week. March silver futures swelled $0.738, or 3.14%, to $24.23 an ounce. The white metal has strengthened in the first trading weeks of the year, climbing close to 4% year-to-date.
Precious metals are trying to defy the market consensus and trigger a rally as it will snap a four-session skid. Indeed, the slump in the greenback and bonds has supported gold.
“The rise in Treasury yields and expectations of higher interest rates are having a negative toll on gold prices,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily note.
That said, on Wednesday, the US Dollar Index (DXY) tumbled 0.21% to 95.53, from an opening of 95.77. So far this year, the index has shed 0.45%. A weaker buck is bullish for commodities priced in dollars because it makes it cheaper for foreign investors to purchase.
The US Treasury market is drowning in red ink, with the benchmark 10-year yield down 0.043% to 1.825%. The one-year bill dipped 0.011% to 0.539%, while the 30-year bond erased 0.043% to 2.143%. Falling yields are generally good for gold because it diminishes the opportunity cost of holding non-yielding bullion.
Meanwhile, all eyes will be on next week’s Federal Open Market Committee (FOMC) policy meeting, where the Federal Reserve could provide further direction on how officials will move on interest rates and the balance sheet.
In other metal markets, March copper futures tacked on $0.0845, or 1.93%, to $4.467 per pound. March platinum futures jumped $49.40, or 5.04%, to $1,028.90 per ounce. March palladium futures soared $102.40, or 5.38%, to $2,007.00 per ounce.