Gold futures are struggling to climb back toward $1,800 to start the trading week as the yellow metal slumps on a strengthening US dollar and rising Treasury yields. Gold prices are coming off a weekly loss, falling about 2% to start the year. Will the precious metal face another down year in 2022?
February gold futures tumbled $7.70, or 0.43%, to $1,789.70 per ounce at 13:26 GMT on Monday on the COMEX division of the New York Mercantile Exchange. Gold topped $1,800 in overnight trading before erasing those gains.
Silver, the sister commodity to gold, is trying to stay above the crucial $22 mark to kick off the trading week. March silver futures fell $0.109, or 0.49%, to $22.30 an ounce. The white metal has continued its downward trend from last year, falling 4.5% in the first few sessions of 2022.
Gold and the broader metals market have been impacted by quantitative tightening employed by the Federal Reserve and other central banks. However, prospects of potentially tapering the taper amid a disappointing December jobs report and the wide effects of the Omicron variant could support gold.
That said, the two main developments affect gold markets on Monday are the US dollar and bonds.
The US Dollar Index (DXY), which measures the greenback against a basket of currencies, surged 0.51% to 96.21, from an opening of 95.74, at 13:32 GMT on Monday. The DXY has traded relatively flat in the early part of 2022. A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
Rising Treasury yields hurt the metals, with the benchmark 10-year yield up 0.036% to 1.805%. The one-year bill edged up 0.008% to 0.425%, while the 30-year bond picked up 0.033% to 2.149%. Rising rates are generally bearish for metals because they lift the opportunity cost of holding non-yielding bullion.
Looking ahead, it is going to be a crucial week for the gold and the broader markets as inflation and retail sales data will be released. Early estimates show that the consumer price index (CPI) will hit 7%, while retail sales will be flat at 0%.
In other metal markets, March copper futures fell $0.0405, or 0.92%, to $4.3695 per pound. March platinum futures dropped $29.60, or 3.09%, to $926.90 an ounce. March palladium futures shed $4.60, or 0.24%, to $1,917.00 per ounce.