Gold futures are rebounding from last week’s sharp losses as the yellow metal found support from a weaker greenback and plummeting Treasury yields. The precious metal has had a horrific year, which started when the Federal Reserve began raising interest rates and trimming its $8.9 trillion balance sheet. But with inflation elevated and weaker data coming in, can gold prices retest $1,700?
December gold futures advanced $23.30, or 1.41%, to $1,671.80 per ounce at 13:13 GMT on Monday on the COMEX division of the New York Mercantile Exchange. Gold prices are coming off a weekly loss of about 1%, adding to their year-to-date loss of nearly 9%%.
Silver, the sister commodity to gold, is targeting $19 again. November silver futures rallied $0.719, or 3.98%, to $18.79 an ounce. The white metal fell more than 4% last week, adding to its bear market losses.
The metals market benefited from a rally in the broader financial markets, which weighed on the greenback and bond market. Investors are still pricing in a possible interest-rate cut next week after a series of abysmal economic prints in recent days.
“The inflation data was terrible for the yellow metal as it cemented a 75 basis point hike from the Fed next month. Not just that, with inflation seemingly so stubborn, it may need to go further than markets previously anticipated,” said Craig Erlam, senior market analyst at Oanda, in a note. “That doesn’t bode well for gold in the near term. Yesterday’s lows around $1,640 could soon be tested once more, with the late-September lows the next test after that.”
In addition, on Monday, the New York Empire State Manufacturing Index plunged to -9.1 in October, worse than the market forecast of -4.
Later this week, industrial and manufacturing production and housing data will be released.
The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, plunged 0.66% to 112.56, from an opening of 113.22. The index is up more than 17% year-to-date. A stronger buck is bearish for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.
The US Treasury market was mostly in the red, with the benchmark ten-year yield down 8.8 basis points to 3.918%. The one-year bill shed 2.2 basis points to 4.462%, while the 30-year bond dropped 4.6 basis points to 3.929%.
A rising-rate environment is typically bad for non-yielding bullion because it lifts the opportunity of holding these types of assets.
In other metal markets, November copper futures rose $0.0215, or 0.63%, to $3.445 per pound. November platinum futures tacked on $22.50, or 2.51%, to $917.60 an ounce. November palladium futures swelled $28.70, or 1.44%, to $2,026.00 per ounce.