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Gold futures on Tuesday headed toward their lowest price in about seven weeks, weighed down by steadily rising U.S. Treasury yields and a strengthening dollar.
December gold
GCZ21,
GC00,
traded $18.40, or 1.1%, lower to reach $1,733.60 an ounce, putting the precious metal on track to register lows not seen since around Aug. 10, FactSet data show. Bullion on Monday edged up less than 0.1% on Monday, even as Treasury yields were climbing a day ago.
However, on Tuesday the commodity succumbed to a rise in the benchmark 10-year Treasury note yield
TMUBMUSD10Y,
to above 1.5%, amid expectations for tighter monetary policy, and a roughly 0.2% rise in the U.S. dollar, as gauged by the ICE U.S. Dollar Index
DXY,
a measure of the dollar against a half-dozen currencies.
“Gold held up surprisingly well but is unlikely to come out unscathed from an environment of rising real rates and a yield-powered dollar,” wrote Marios Hadjikyriacos, senior investment analyst, in a research note.
Higher yields in government debt compete against precious metals for investors, which don’t offer a coupon, among investors seeking an investment perceived as a haven.
Meanwhile, silver for December delivery
SIZ21,
was down 52 cents, or 2.3%, to reach $22.18 an ounce, following a 1.2% rise for gold’s sister metal.
Trading in precious metals on Tuesday come as investors are awaiting comments from Federal Reserve Chairman Jerome Powell, who is speaking in front of the Senate Banking Committee, along with U.S. Treasury Secretary Janet Yellen, on the government’s response to the coronavirus pandemic.
Meanwhile, investors also are watching Washington policy makers, which have struggled to raise the federal borrowing limit, or debt ceiling, before the government runs out of money to pay its bills sometime over the next month or so. A failure to raise the debt limit could rattle markets and presumable push gold higher.
On Monday, Senate Republicans blocked a Democratic bill that would fund the government and raise the borrowing limit. The government’s current funding expires on Oct. 1. Democrats may be forced to use a budget reconciliation procedure in the Senate to pass a budget including a rise in the federal debt ceiling, but that procedure that may take two weeks.
