Gold futures are struggling for direction to kick off the trading week, as the yellow metal is getting decimated by a skyrocketing US dollar and rising Treasury yields. Despite high inflation and recession fears, central banks’ tightening efforts are weighing on metal commodities.
December gold futures dipped $2.00, or 0.12%, to $1,653.60 per ounce at 13:33 GMT on Monday on the COMEX division of the New York Mercantile Exchange. Gold prices are coming off a weekly loss of nearly 2%, adding to their year-to-date decline of close to 10%. This is the lowest level in more than two years.
Silver, the sister commodity to gold, fell below $19 in the final trading week of September. October silver futures tumbled $0.06, or 0.32%, to $18.85 an ounce. The white metal also slumped about 3% last week, adding to its year-to-date decline of 19.25%. Silver is on the cusp of a bear market.
Overall, the precious metals market has been decimated since March, driven by more aggressive monetary policy tightening by the Federal Reserve and its counterparts. The quantitative tightening campaign by the Eccles Building has supported the spike in the buck and Treasury yields.
The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, rose 0.17% to 113.39, from an opening of 113.19. The index climbed more than 3% last week, bringing its year-to-date rally to more than 18%.
A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
Treasury yields were mostly up across the board, with the benchmark ten-year yield rising 6.2 basis points to 3.759%. The one-year bill was flat at 4.12%, while the 30-year bond jumped 3.3 basis points to 3.645%. The recession-indicating spread between the two- and ten-year yields widened to nearly -50 basis points.
Gold is typically sensitive to a rising-rate climate because it lifts the opportunity cost of holding non-yielding bullion.
Meanwhile, investors are also focused on what is happening with the British pound. As FX Daily Report noted on Monday:
“The British pound fell to an all-time low against the US dollar to kick off the trading week, joining the weakness in the broader forex market. The sterling has been decimated in recent weeks, driven by abysmal economic data and government tax cuts and investment incentives to support growth.”
In other metal markets, October copper futures were unchanged at $3.343 per pound. October platinum futures were relatively flat at $859.10 per ounce. October palladium futures edged up $4.00 or 0.19%, to $2,074.50 an ounce.