Gold slips on surging U.S. Home Sales reported this morning dropping over $10 an ounce. The yellow metal had regained some turf into positive territory earlier in the trading day on short covering as it hovered near a seven-week low. Gold was under pressure as the dollar and Treasury yields strengthened on anticipation that central banks would increase interest rates sooner than previously anticipated.
The U.S. Housing market’s welcome surprise dinged gold this morning. In August, signed contracts for existing homes jumped 8.1% according to the National Association of Realtors. The market got a boost from higher inventory and more favorable prices. Analysts had forecast a 1% monthly increase.
U.S. stocks rose Wednesday as the 10-year Treasury yield cooled. At the opening, the Dow rose 150 points, or 0.4%, he S&P 500 gained 0.6%, and the Nasdaq gained 0.8%. On Tuesday, the Nasdaq posted its worst day since March amid a spike in bond yields. The 10-year Treasury Treasury yield eased on Wednesday to trade near 1.5% after hitting a high of 1.567% on Tuesday.
The precious metals tumbled Wednesday along with equities as the dollar index traded near a 10-month high and U.S. 10-year Treasury yields were near a three-month high. Increases in both the dollar and Treasury yields makes it more expensive to hold bullion.
St. Louis Federal Reserve President James Bullard said Tuesday that the central bank may have to increase interest rates twice in 2022 because of rising inflation and indicated that other aggressive steps might be necessary. Higher interest rates are bearish for gold and other precious metals. Gold is a traditional hedge against inflation.
December gold futures fell 0.8% Tuesday to settle at $1,737.50 an ounce on Comex, and the front-month contract is down 0.8% so far this week. Gold has retreated 4.4% so far this month after gaining just 90 cents in August. The yellow metal climbed $372 – or 24% – in 2020 because of uncertainty about the economy and the pandemic and is down 8.3% so far in 2021. The December contract is currently down $7.10 (-0.41%) to $1,730.40 and the DG spot price is $1,728.60.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell to 990.03 metric tons Tuesday from 990.32 metric tons the day before, Reuters reported.
Prices also came under pressure as equities tumbled amid fears that the U.S. would fail to raise the debt ceiling, causing a “catastrophic” default, according to testimony by Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen. Republicans blocked a move by Democrats in the Senate to raise the debt ceiling.
Powell is scheduled to appear Wednesday on a European Central Bank panel with ECB President Christine Lagarde and the heads of the Bank of England and Bank of Japan. Then the House Financial Services Committee will hold a hearing Thursday on the Fed and the Treasury’s response to the pandemic.
In other economic news, key first-of-the-month manufacturing data for September are due out from all major economies at the end of the week, and U.S. weekly initial jobless claims are scheduled for release Thursday.
December silver futures decreased 1% Tuesday to settle at $22.47 an ounce on Comex, though the front-month contract was up 0.2% for the first two days of the week. Silver is down 6.4% this month after dropping 6% in August, its third consecutive monthly decline. The metal rose 47% in 2020 and is down 15% so far this year. Silver prices are tied to industrial demand, which could taper if lockdowns are reinstated and dampen manufacturing. The December contract is down $0.912 (-4.06%) an ounce to $21.55 and the DG spot price is $21.51.
Spot platinum fell 1.5% Tuesday to $975.00 an ounce, and it’s also down 1.5% so far this week. The metal has lost 4.9% so far this month and 9.2% so far this year. Currently, the DG spot price is down $17.80 an ounce to $955.10.
Spot palladium dropped 4.5% Tuesday to $1,891.00 an ounce and has retreated 4.6% so far this week. It has lost 24% so far this month after falling 7% in August. It has fallen 23% so far in 2021. The DG spot price marks a firm rise this morning, currently up $17.30 an ounce to $1,903.50.
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