Gold futures dropped Thursday, deepening their descent below the key $1,300 line, after falling this week to their lowest point of the year.
”The firm U.S. dollar and rising U.S. bond yields are continuing to exert pressure,” said Carsten Fritsch, commodities analyst at Commerzbank.
“Yields on 10-year U.S. Treasury notes have climbed further to 3.12%. The yield advantage over German government bonds of the same maturity has meanwhile reached 250 basis points. The last time it was any higher was almost 30 years ago,” he said. “This argues in favor of the U.S. dollar, against the euro and also against gold, which yields no interest.”
With those market dynamics at work, June gold GCM8, -0.22% fell by $2.20, or about 0.2%, to $1,289.50 an ounce after a mild rebound for prices on Wednesday. Earlier this week, gold dropped by more than 2% in a single session to $1,290.30, the lowest settlement for a most-active contract since late December, according to FactSet data. Gold has finished higher only once in the last five sessions.
July silver SIN8, +0.70% took another path, trading at $16.46 an ounce, up 0.5%.
The yield on the 10-year Treasury note TMUBMUSD10Y, +0.21% was steady near a 7-year high at 3.1%. The U.S. dollar, as measured by the ICE U.S. Dollar Index DXY, +0.20% was up 0.2% at 93.51, maintaining trade at its highest level of 2018, according to FactSet data.
Higher yields dent demand for nonyielding bullion and a strengthening greenback makes commodities priced in the currency, like gold, more expensive to buyers using other monetary units.
A pair of economic reports did little to dissuade market expectations for higher interest rates at the hands of the Fed over coming weeks and months, another factor weighing on gold sentiment.
The Philadelphia Fed manufacturing index jumped to 34.4 in May from 23.3 in April. That was well above the economist consensus for a reading of 21 and is the highest reading in a year. A separate report showed a gain in jobless benefits claims, but little in one week’s data to move the total of claims from their nearly 50-year lows.
Gold hasn’t earned a ton of traction from geopolitical developments, though the metal’s tight range of roughly $1300 to $1350 for much of the year, before the latest retreat, was credited in part to demand for the haven metal.
A second round of U.S.-China trade talks was set to begin in Washington on Thursday, which comes amid a running standoff between the two countries over tariffs. Meanwhile, questions are lingering over another geopolitical front—North Korea—after Pyongyang signaled a day earlier that Kim Jong Un might pull out of next month’s summit with Trump if the U.S. insists on denuclearization for the isolated nation.
Among other metals, copper for July delivery HGN8, +0.59% rose 0.3% to $3.0805 a pound. July platinum PLN8, -0.12% shed 0.4% to $886.70 an ounce, while June palladium PAM8, -0.34% fell 0.5% to $977.70 an ounce.
In exchange-traded action, the SPDR Gold Shares GLD, -0.09% fell 0.2%, while the iShares Silver Trust SLV, +0.68% climbed 0.2%. The VanEck Vectors Gold Miners GDX, -0.40% eased 0.4%.