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PAUL FAITH / AFP Gold bullion on show at Merrion vaults in Dublin on January 7, 2019
Gold futures dropped Thursday, on pace to post their lowest finish in three months and largest weekly percentage decline in more than a year.
Renewed optimism about a near-term, partial U.S.-China trade agreement stirred a rise in debt yields, dulling the appeal of precious metals.
On Thursday, China and the U.S. agreed to lift some tariffs on one another in stages if the two countries reach a partial trade deal.
“This is what [the two sides] agreed on following careful and constructive negotiations over the past two weeks,” said China Ministry spokesman Gao Feng, during a regularly scheduled news briefing.
December gold GCZ19, -1.92% on Comex declined $27.50.70, or 1.8%, at $1,465.60 an ounce, wiping out much of its 0.6% gain from Wednesday. A settlement around the current level would be the lowest since Aug. 2 for a most-active contract, according to FactSet data. December silver SIZ19, -3.40% shed 53.3 cents, or 3%, at $17.065 an ounce.
For the week, gold trades 3% lower, which would mark its sharpest such decline in over a year, according to FactSet data. Silver’s down about 5.5% for the week so far, poised for the biggest weekly drop since the week ended July 7, 2017.
A recent rise in yields for government paper poses a threat to bullion as investors tend to gravitate to assets perceived as safe investments that offer higher yields, and precious metals don’t bear a coupon, analysts say.
The 10-year Treasury note yield TMUBMUSD10Y, +8.48% was at 1.9491% on Thursday, compared with 1.727% at the start of November. Meanwhile, the U.S. dollar has climbed, up 0.2% at 98.181, as gauged by the ICE U.S. Dollar Index DXY, +0.23%, a measure of the dollar against a half-dozen currencies.
“What ultimately matters more for gold is the hard and exact inverse correlation to US yields and the US dollar,” wrote Stephen Innes, market strategist of the Asia Pacific region at AxiTrader, in a daily research note.
“With US 10-year nominal yields loitering around 1.85% and the dollar looking more attractive gold loses some of its shine,” he wrote.
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Gold prices also declined on the back of gains in benchmark U.S. stock indexes, with the Dow Jones Industrial Average DJIA, +0.91%, S&P 500 index SPX, +0.54% and Nasdaq Composite COMP, +0.71% notching new intraday records Thursday.
Other metals on Comex saw mixed trading, with December copper HGZ19, +2.40% up 2.2% at $2.7245 a pound and December palladium PAZ19, +0.33% at $1,767.30 an ounce, up 0.4%, but January platinum PLF20, -2.35% losing 2.2% to $911.40 an ounce.
