Gold drops as bond yields rise

Gold drops as bond yields rise

Gold drops as bond yields rise, falling early Monday as risk appetite also picked up adding to the pressure on the precious metal.

Gold failed to sustain a move above the $2,000-an-ounce resistance level last week after surging about 10% over the past few weeks because of haven demand from the conflict in the Middle East. 

Investors are awaiting remarks from Federal Reserve Chair Jerome Powell on Wednesday and Thursday and signals this week from other central bank officials on monetary policy after the Fed kept interest rates unchanged at 5.25% to 5.50% last week. 

The closely watched U.S. jobs report showed Friday that employment growth slowed by more than expected in October as the unemployment rate rose to a near-two-year high of 3.9%. The signs that the labor market is cooling may add to speculation that the Fed will leave interest rates unchanged again in December, as it approaches the end of its rate-increase cycle to curb inflation. 

Front-month gold futures rose 70 cents last week to settle at $1,999.20 an ounce on Comex after the December contract gained 0.3% Friday. Bullion gained 6.9% in October after falling 5.1% in September and dropping 2.2% in August. The metal is up 9.5% in 2023. The December contract is currently down $6.80 (-0.34%) an ounce to $1994.20 and the DG spot price is $1987.00.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.2% Friday to 863.24 metric tons, Reuters reported.

About 90.2% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in December, while 9.8% expect it to raise rates by 25 basis points. The central bank has raised interest rates only once since May but has boosted them 5.25 percentage points since March 2022 to curb inflation. The prospect of a pause or cut in interest rates is bullish for gold, which comes under pressure when rates are high. 

The Fed closely watches both labor market data and inflation data when determining monetary policy. The core personal consumption expenditures price index, the Fed’s favorite inflation measure, accelerated to a four-month high in September as consumer spending picked up.

Front-month silver futures increased 1.7% last week to settle at $23.29 an ounce on Comex after the December contract rallied 1.9% Friday. Silver increased 2.2% last month after decreasing 9.5% in September and slipping 0.6% in August. It’s down 3.1% in 2023. The December contract is currently down $0.040 (-0.17%) an ounce to $23.245 and the DG spot price is $23.21.

Spot palladium fell $1 last week to $1,133.00 an ounce, though it gained 1.2% Friday. Palladium dropped 10% in October after rising 3% in September and sliding 5.3% in August. Palladium has plummeted 37% so far this year. Currently, the DG spot price is down $2.80 an ounce to $1130.50.

Spot platinum advanced 3.9% last week to $942.20 an ounce after rising 1.2% Friday. Platinum gained 3.5% in October after declining 6.6% last month and advancing 1.7% in August. Platinum is down 12% in 2023. The current DG spot price is down $14.00 an ounce to $929.30.

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