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Metals Stocks: Gold futures skid 1.4% as investors wrestle with inflation outlook

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Gold futures headed sharply lower Monday morning, with prices under heavy selling pressure despite lower-bound bond yields and a weaker dollar, ahead of an important meeting of the Federal Reserve.

Gold for August delivery
GCQ21,
-1.60%

GC00,
-1.60%

 was down $26.90, or 1.4%, to $1.852.70 an ounce, after prices for the most-active contract settled down about 0.7% for the week.

Investors are readying Federal Reserve policy makers’ comments from a two-day meeting starting Tuesday. Commodity investors will be keyed in on the central bank’s view on inflation and the labor market, which have diverged in recent months, as reports on inflation have come in stronger than expected and jobs report have been weaker than expected in the recovery phase of the pandemic.

Gold is seen as a hedge against inflation and trade in Treasurys have implied that fixed-income investors have deemed price pressures as likely fleeting. The 10-year Treasury note
TMUBMUSD10Y,
1.470%

was yielding around 1.46%, hanging near its lowest levels since March, while a gauge of the U.S. dollar, the ICE U.S. Dollar Index
DXY,
-0.13%
,
was down less than 0.1%.

Against that backdrop, trade in gold has been uneven in the month and year.

Still some investors are bullish on the outlook for bullion.

“The precious metal is losing some of its mojo as the price has moved away from the [$1,900] price level. However, the current retracement in the gold price doesn’t impose any long term threat to its uptrend,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a Monday note.

Meanwhile, July silver
SI00,
-1.78%

SIN21,
-1.78%

was down 44 cents, or 1.5%, at $27.73 an ounce, after booking a 0.9% weekly gain on Friday.

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