Gold futures finished sharply lower Tuesday, but avoided a more pronounced decline for the commodity that saw it tumble by as much as 1.7% at the session’s nadir.
Weighing on bullion was a pickup in yields for government debt and firmness in the U.S. dollar. A stronger greenback can make dollar-pegged precious metals more expensive to overseas buyers, while higher bond yields can raise the opportunity costs of buying Treasurys versus gold and silver which don’t offer a yield.
August gold GCQ21, -0.96% GC00, -0.96% slumped $17.10, or 1%, to end at $1,763.60 an ounce, and touching an intraday low at $1,750.10, after bullion climbed 0.2% on Comex on Monday. At the height of Tuesday’s selling, bullion was on track for the worst monthly decline, down over 8% in June to date, since 2013.
Investors remain focused on the Federal Reserve’s outlook for inflation in the recovery phase of the U.S. economy from COVID-19.
The outlook for gold is complicated by the Fed’s view that higher inflation is temporary and a rise in interest rates will only happen slowly and probably not until late 2022. Gold tends to benefit from rising inflation and lower interest rates.
“The markets appear increasingly unsettled by the Fed’s taboo on inflation, with a growing number of investors taking a net view that the central bank’s ambiguity, mixing a new hawkish stance with dovish declarations from some officials, will ultimately translate into higher interest rates sooner than previously expected,” wrote Ricardo Evangelista, senior analyst at ActivTrades, in a Tuesday note.
Evangelista projects that such a scenario will underpin the dollar and provide more turbulence for bullion, which could “therefore, generate more short-term losses for gold.”
Elsewhere on Comex, October platinum PLV21, -2.73% closed down $28.90, or 2.6%, at $1,070.60 an ounce, after shedding 0.5% on Monday. September palladium PAU21, -0.76% declined by $18.20, or 0.7%, to settle at $2,681.20 an ounce, after rising 2.4% a day ago.
The most-active September copper contract PAU21, -0.76% lost 1.4 cents, or 0.3%, to $4.2645 a pound, following a 0.3% decline on Monday.