Gold futures are slumping on Monday after coming off a modest weekly gain. The yellow metal is trying to find support amid a weaker US dollar and a mixed Treasury market. But gold is joining the broader financial market when it comes to low volatility, something that has been prevalent throughout the month of April. Could this bullish for gold prices, or will it negatively impact its safe-haven appeal?
May gold futures tumbled $3.30, or 0.19%, to $1,741.50 per ounce at 12:40 GMT on Monday on the COMEX division of the New York Mercantile Exchange. The yellow metal recorded a 1% weekly gain last week, paring its year-to-date loss to below 9%.
Silver, the sister commodity to gold, is also sliding to kick off the trading week. June silver futures dropped $0.145, or 0.57%, to $25.18 an ounce. The white metal rose about 1% last week, lowering its 2021 decline to around 5%.
Federal Reserve Chair Jerome Powell recently spoke with 60 Minutes, explaining that the US economy is at an “inflection point,” adding that he hopes inflation and the labor market will accelerate in the coming months. Although the target inflation rate is 2%, the US central bank implemented a policy last year that allows inflation to run above the intended rate before intervening.
It will be quiet on the data front on Monday, meaning that the greenback and bonds will be the primary driver of gold prices.
The US Dollar Index (DXY) slipped 0.11% to 92.06, from an opening of 92.18, on Monday. The DXY shed 0.1% last week, but it remains up 2.4% year-to-date. A weaker buck is good for commodities priced in commodities because it makes it cheaper for foreign investors to purchase.
Treasury yields were mixed on Monday, with the benchmark 10-year bond down 0.002% to 1.664%. The one-year bill edged up 0.003% to 0.061%, while the 30-year bond shed 0.008% to 2.331%. The Treasury market has dominated business headlines for the last two months because of their rally. A higher yield is bad for non-yielding bullion because it increases the opportunity cost of investors.
So, is the bullish cycle for gold over? After suffering its largest quarterly loss since 2016, bearish sentiment has cast its shadow over the gold market. But this might be a case of an east-west divide, says Kevin Rich, global gold market adviser for the Perth Mint. In the US and Europe, gold investment demand has fallen, but Asian markets have moved to premiums and demand has strengthened.
Although inflation worries continue to prop up gold, positive economic outlooks could hinder the precious metal.
In other metal markets, May copper futures fell $0.022, or 0.54%, to $4.018 per pound. May platinum futures plunged $23.30, or 1.93%, to $1,186.00 an ounce. May palladium futures edged up $1.00, or 0.04%, to $2,637.00 per ounce.