Metals Stocks: Gold prices trade mostly lower on rise in Treasury yields


Gold futures traded mostly lower Monday, pressured by a rise in Treasury yields, with investors continuing to react to the Federal Reserve’s signaling that it will taper purchases of billions in government debt and mortgage-related bonds as the U.S. economy recovers from COVID.

“With downside momentum seemingly slowing, gold could see some reprieve in the near term but the broader outlook isn’t great,” said Craig Erlam, senior market analyst at Oanda, in a market update. “Inflation is typically part of the bullish case for gold, but it’s very much working against it at the moment as it pushes central banks towards the stimulus exit doors.”

For now, “lower inflation and more central bank stimulus is seemingly more favourable for the yellow metal,” said Erlam.

December gold


fell by $1.10 to trade at $1,754 an ounce, following a weekly gain for bullion of 30 cents or less than 0.1%. Meanwhile, silver for September delivery

was up 29 cents, or 1.3%, at $22.71 an ounce, after gold’s sister metal posted a 0.4% weekly rise on Friday.

Monday’s trade for precious metals comes against the backdrop of steadily climbing yields, with the 10-year benchmark Treasury note

near 1.5%, representing the highest rate since the start of July and the longer-date 30-year Treasury bond

touching highs above a psychologically significant level at 2%.

Higher rates for government debt can compete with precious metals, such as gold and silver, which don’t offer a coupon.

Anticipation of a reduction of the Fed’s purchases of $80 billion in Treasurys and $40 billion in mortgage-backed securities, in a process referred to as tapering, has put pressure on demand for Treasurys, pushing yields higher. Bond yields and prices move in the opposite direction.

However, likely capping any potential declines for bullion and silver are worries about the outlook for highly leveraged Chinese property developer Evergrande, which was blamed for roiling global markets last week. Reports indicate now that the company which has some $300 billion in debts, has failed to make key payments due last week, with a further slug of its debt obligations coming due soon.

“Gold prices have risen after China’s Evergrande failed to make a payment on offshore bonds, with additional payments due this week. Because of the uncertainty surrounding this situation, investors have migrated to gold,” wrote Naeem Aslam, chief market analyst at AvaTrade in a daily note.

“However, gold’s gains resisted a rise in 10-year Treasury bond yields after the Fed hinted at commencing the withdrawal of its massive stimulus program in November,” the AvaTrade analyst wrote.

“A rise in treasury yields raises the opportunity cost of holding gold, causing investors to shift to other forms of investment,” Aslam said.

Gold prices found support even as data Monday revealed that U.S. orders for durable goods climbed by 1.8% last month. Economists polled by the Wall Street Journal had forecast a 0.6% increase. The increase in business orders was somewhat exaggerated last month, however, with bookings up a scant 0.2% if transportation is excluded.

Among other metals traded on Comex, December copper

climbed by 0.4% to $4.30 a pound. October platinum

added 0.5% to $984.90 an ounce, while December palladium

traded at $1,933.50 an ounce, down 0.9%.

The month of September has “favored the palladium bear camp with macroeconomic slowing in the numbers, projections of unending chip shortages in the auto industry, and threats of severe economic change in China from reform measures,” analysts at Zaner wrote in Monday’s daily commentary. “However, from the a technical perspective, the palladium market is oversold, with the most recent positioning report showing a new ‘record short’ in the [speculative] and fund categories.”

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