Gold futures broke sharply lower Tuesday after upbeat U.S. economic data added to pressure from climbing rates in the benchmark 10-year Treasury, leaving the metal’s price flirting with a seven-month low and a test below the closely watched $1,300 line.
Gold is also on track for a sixth loss in seven sessions as those reports showed sales at U.S. retailers rose in April for the second straight month, adding to evidence the economy sped up after a slower start to the year. A separate report showed a sharp snap back in New York economic growth.
In response, June gold GCM8, -1.86% was recently off $19.40, or 1.5%, to $1,299.30 an ounce. The contract has now shed some 4.6% since a recent peak of $1,322.30 was hit just last week, a roughly two-week high.
“Importantly, the yellow metal has fallen below major technical support at $1,300,” said Jim Wyckoff, senior analyst at Kitco Metals. “The drop below that key level set off a large number of pre-placed sell stop orders in the futures market, to drive prices still lower. The U.S. dollar index has resumed its trek north today, which is, and has been, a significantly bearish force working against the precious metals bulls.”
A close at current levels, if it holds, would represent the lowest for a most-active contract since Dec. 28, when it settled at $1,297.20, according to FactSet data. The retreat for gold also pushes the commodity below its 200-day moving average at $1,307.80 for the first time since late December.
July silver SIN8, -2.43% fell more than 2% to $16.275 an ounce.
Exchange-traded funds logged sizable pre-market drops, the SPDR Gold Shares GLD, -1.47% traded down 1.2%, while the iShares Silver Trust SLV, -1.67% shed 1.6%. The VanEck Vectors Gold Miners GDX, -2.13% fell 1.8%.
The ICE U.S. Dollar Index DXY, +0.58% climbed 0.6% to 93.25, rising for a second straight day. A firmer U.S. currency leaves dollar-priced gold less appealing to investors using another currency.
Higher yields also dented demand for nonyielding bullion as the benchmark 10-year Treasury note poked above a closely watched level at 3% and government debt rates broadly climbed along with their European counterparts. The 10-year Treasury note yield TMUBMUSD10Y, +1.93% was yielding 3.018%, while the short-dated 2-year note yield TMUBMUSD02Y, +0.17% edged 0.7 basis point higher to 2.552%, extending a yield move at around a decade peak.
Gold had remained pinched in a narrow trading band and the vulnerability of the lower end of the roughly $1,300-to-$1,350 range that has confined the metal so far this year will be closely watched. Even an expected quarter-point Federal Reserve interest-rate increase as soon as next month, as Fed watchers are anticipating, which would typically be a gold-negative event, may not be enough to shake the metal from the relatively tight $1,300 to $1,350 range it has been confined to this year, analysts have said.
“Seems like we are back to the 2017 trading environment of low volatility and climbing the ‘wall of worry’ higher,” said Jason Rotman, principal with Lido Isle Advisors. “Oil continues its blistering rally, and doesn’t look to be stopping here. Personally, I am very surprised gold is not much lower. With rates rising, the stock market looking like the worst may be behind it, and the dollar strong, why isn’t gold $100 lower? Even with the two Koreas meeting.”
Read: Fed could have to raise interest rates above 3%, Mester says
In other metals trading, July copper HGN8, -1.31% declined by 0.2% to $3.0855 a pound. July platinum PLN8, -1.86% shed 1.2% to $903.10 an ounce, while June palladium PAM8, -2.84% fell 2.4% to $971.30 an ounce.
A quarterly report Monday from World Platinum Investment Council showed expectations for tighter platinum supplies this year, compared with 2017, but the market is still forecast to see an overall supply surplus this year of 180,000 ounces, down from a surplus of 315,000 ounces in 2017.