Gold futures plummeted on Tuesday, falling below the crucial $1,800 mark. The yellow metal has been down for much of 2021 on a strengthening US dollar, although gold prices have risen close to 4% over the last month. But gold is joining the broader overall weakness in the financial markets, driven by monetary policy uncertainty and concerns over the Delta variant.
October gold futures tumbled $38.10, or 2.08%, to $1,795.60 per ounce at 20:41 GMT on Tuesday on the COMEX division of the New York Mercantile Exchange. This is the largest single-session loss in a month. Gold has slumped around 1% over the last week, adding to its year-to-date drop of close to 6%.
Silver, the sister commodity to gold, failed to cross the $25 mark in recent sessions. October silver futures plunged $0.422, or 1.7%, to $24.38 an ounce. The white metal is up 1.5%, but it is still down 8% so far this year.
Gold prices are focused on four things: the greenback, Treasury yields, the Federal Reserve, and the Delta variant.
The US Dollar Index (DXY), which measures the greenback against a basket of currencies, surged 0.55% to 92.55, from an opening of 92.20. A stronger buck is bearish for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.
Bonds were mostly in the green on the first day back from the Labor Day holiday, with the benchmark 10-year yield up 0.055% to 1.377%. The one-year bill edged up 0.002% to 0.068%, while the 30-year bond jumped 0.05% to 1.992%. Higher yields are also bearish for gold prices since it raises the opportunity cost of holding non-yielding bullion.
Meanwhile, the plethora of disappointing economic data has prompted market analysts to anticipate the Federal Reserve being a bit more cautious about pulling the trigger on tapering the $120-billion-a-month quantitative easing program. Whether it was the lackluster August jobs report or the declining purchasing managers’ index (PMI) readings, the central bank may think that the US economic recovery requires prolonged stimulus.
Moreover, if the Delta variant, and potentially the Lambda and Mu variants, is impacting growth, the Fed may delay any tapering for several more months. The number of new infections in the US has surged to a seven-day average of more than 132,000, the highest it has been since Christmas.
In other metal markets, October copper futures slumped $0.061, or 1.41%, to $4.273 per pound. October platinum futures fell $27.00, or 2.64%, to $994.60 per ounce. October palladium futures tumbled $50.30, or 2.08%, to $2,366.00 an ounce.