Gold prices retreated on Wednesday as the U.S. dollar strengthened and as stocks across the globe mostly advanced, suggesting some waning appetite for bullion.
In a daily note, analysts at Zaner Metals said they “detect a bit of vulnerability in the gold market…with the charts tilting downward and risk on in equities just enough to chase some money from gold.”
However, gold trading of the past several days has been erratic, with the commodity sometimes trading out of sync with its normal correlations with equities and bond yields, which have both been rising over the week—a scenario that should create a headwind for precious metals.
In Wednesday dealings, August gold GCQ20, -0.31% was off $6, or 0.4%, at $1,73050 an ounce, on Comex, after the metal rose 0.5% on Tuesday, notching its first gain in three sessions. Gold futures have been trading in a $1,670 to $1,770 range for about two months despite a sharp fall in the U.S. dollar DXY, +0.34% against major currencies in that time.
July silver SIN20, +0.13%, meanwhile, edged up by 6.3 cents, or 0.4%, to $17.715 an ounce, following a 1.5% rally in the previous session.
For the week thus far, gold is off 0.4%, while silver has risen 1.3%, according to FactSet data.
The U.S. dollar was up 0.3% on Wednesday, as gauged by the ICE U.S. Dollar Index DXY, +0.34%, a measure of the buck against a half-dozen currencies. For the week, however, the index is off 0.1%. A weaker dollar should ordinarily provide support for assets priced in the monetary unit.
Meanwhile, bond yields have been rising somewhat, perhaps providing a counter to the dollar moves and creating some friction for precious metals which don’t bear a coupon. The 10-year Treasury note yield TMUBMUSD10Y, 0.735% was at 0.74% after finishing last Friday at 0.698%.
Moves for metals also come as stocks broadly were buoyant as investors appeared to take heart in efforts under way to reopen economies shutdown to curtail the spread of coronavirus. On top of that, a report of a potential treatment for COVID-19 also has softened some appetite for safe-haven assets.
“Traders and investors are weighing the bullish aspects of generally faster rebounds in world economies than many had expected versus the bearish element of a resurgence in Covid-19 reported cases in some regions of the globe, including some U.S. states,” said Jim Wyckoff, senior analyst at Kitco.com.
“At present, it appears the global economic growth factor is winning out,” he said in daily commentary. However, “skeptics can argue the rally in world stock markets is mainly due to the floods of central-bank infused cash that have hit the global financial system.”
Meanwhile, investors attributed gains for precious metals on Tuesday partly to signs of rising tensions on the Korean Peninsula, with a report that North Korea blew up an inter-Korean liaison office in the western border town of Kaesong.
A clash between Indian and Chinese soldiers in their border region this week, during which India said 20 of its soldiers died, marks the first military conflict between the two nations in decades and that, along with the North and South Korea tensions “bear watching,” said Wyckoff.
Elsewhere on Comex, July copper HGN20, +0.33% added 0.7% to $2.5815 a pound. July PLN20, +0.02% rose 0.2% to $845.30 an ounce, but September palladium PAU20, -1.16% lost 1.5% to $1,913.40 an ounce.
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