Gold futures on Monday were pulling back to start trade in the new year on the backfoot, as rising stocks and Treasury rates appeared to overshadow a softer dollar in early action in 2022.
The slide for the precious metal, however, comes as a seasonally strong period of buying in precious metals is expected to commence, analysts said.
“The December-January period is historically very strong for bullion, which has gained in 8 out of the last 10 Januaries,” writes Marios Hadjikyriacos, senior investment analyst in a Monday note.
“As for today, there isn’t much on the economic calendar. Markets will remain closed in the United Kingdom and Canada, so trading volumes will be thinner than normal,” he said.
Metals markets were open on Friday on New Year’s Eve but some international markets remain closed in observance of the New Year’s Day holiday.
February gold GCG22, -0.75% traded $6.20, or 0.3%, to $1,822.40 an ounce.
Last week, the metal rose 0.9%, posted a 2.9% gain, and advanced around 4% in the final three months of the year, FactSet data show. However, gold futures based on the most-active contract notched the sharpest yearly drop, down 3.6%, since the metal ended down over 10% in 2015.
U.S. stock benchmarks like the Dow Jones Industrial Average DJIA, -0.16% YM00, +0.40% and the S&P 500 index SPX, -0.26% ES00, +0.55% were set to trade higher, while the dollar was down 0.1% to start the year. Meanwhile, the 10-year Treasury note yield TMUBMUSD10Y, 1.538% was edging up to around 1.53%.
Gains in equities to start the year imply that investors aren’t in the safe-haven-buying mood, and a rise in yields for debt also makes nonyielding precious metals less appealing compared against debt that offers a coupon. The weaker dollar, which assets such as gold are priced in, is likely limiting the downside for bullion, with a weaker dollar heightening the interest in the commodity for overseas buyers using other currencies.
Meanwhile, March silver SIH22, -1.21% was down 14 cents, or 0.3%, at $23.22 an ounce.
On Friday, silver logged a weekly rise, up 1.8%, with a 2.4% monthly advance and a 5.9% gain for the quarter. However, gold’s sister metal posted a 11.5% yearly fall, marking its sharpest annual drop since 2014 when it fell 19.5%.