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Metals Stocks: Gold prices tumble 2% as 10-year Treasury surges above 1.75% and dollar rises

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Gold futures were hit Tuesday by rising bond yields and a rising U.S. dollar as coronavirus vaccine rollouts lift expectations for higher inflation as economies recover, particularly in the U.S.

“The fresh leg high in yields is hitting demand for nonyielding Gold hard,” wrote Sophie Griffiths, market analyst at Oanda U.K., in a research note.

“We have seen signs of the reflation trade questioning the Fed’s ability to keep interest rates at current ultra-low levels,” the strategist wrote.

Griffiths says that gold falling below $1,700 puts a multimonth low at around $1,680 in place.

At last check, Gold for April delivery
GCJ21,
-1.57%

GC00,
-1.60%

was down $34.20, or 2%, at $1,680.30 an ounce on Comex, after shedding 1.2% in the previous session. Prices based on the most-active contract were trading around their lowest since March 8.

Gains in the 10-year Treasury yield
TMUBMUSD10Y,
1.745%

at 1.76% have been credited with weighing on appetite for precious metals, which don’t offer a coupon.

Meanwhile, the dollar has been perkier amid prospects of a stronger economic recovery from the COVID pandemic. The U.S. dollar was up 0.3% at 93.19, as measured by the ICE U.S. Dollar Index
DXY,
+0.24%
.

Gold’s path has followed that of the U.S. dollar in recent trade, with the currency up 2.6% so far in March, while bullion is down 2.7% on the month, FactSet data show.

President Joe Biden has pledged that 90% of the U.S. population will be eligible for the coronavirus vaccine by April 19, fueling further hope of a robust rebound from the pandemic. The U.S. is now giving 2.8 million doses daily of Covid-19 vaccine, as the supply increases and states increase eligibility. 

Some strategists expect Friday’s jobs report, when the markets will be closed in observance of Good Friday, to register around million jobs for March. That’s on the high side of the range of economists’ estimates, according to Econoday. Average consensus estimates are for an add of 625,000, with range between 439,000 and 1 million.

On top of that, Biden is also set to unveil a two-part infrastructure package on Wednesday that, if passed, would further boost growth prospects, experts say.

On Monday, gold’s drop also came amid news that a large investment fund, Archegos Capital Management, had dumped $30 billion in holdings, including big positions in ViacomCBS VIAC, -6.68% and Discovery DISCA, -1.60%, making some investors concerned about contagion and perhaps compelling some selling of gold.

Key Words: CDC’s Dr. Walensky makes emotional plea to Americans as COVID cases rise again

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