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Gold and silver futures retreated on Monday as banking-system fears abated and yields on U.S. Treasury bonds climbed, robbing precious metals of some of the safe-haven luster that has helped to fuel a multiweek rally.
Price action
-
April gold
GC00,
-1.29% GCJ23,
-1.29%
fell by $35.40, or 1.8%, to $1,948.40 per ounce on Comex after logging their fourth-straight weekly advance on Friday. -
Silver for May delivery
SI00,
-0.85% SIK23,
-0.85%
declined by 25.4 cents, or 1.1%, to $23.085 per ounce. -
June palladium
PAM23,
-0.21%
retreated by $10.90, or 0.8%, to $1,403.50 per ounce, while April platinum
PLJ23,
-0.24%
declined by $4.90, or 0.5%, to $979 per ounce. -
May copper
HGK23,
-0.07%
fell by 2.2 cents, or 0.5%, to $4.053 per pound.
Market drivers
Gold has transformed into “a barometer for financial stress” over the past month, said Marios Hadjikyriacos, senior investment analyst at XM.
Whether the precious metals continue to climb will depend on several factors, including how the financial system fares and whether the Federal Reserve interest rate cuts that are being priced in by futures traders actually happen, he added.
“As things stand, ‘peak stress’ seems to have passed, so there’s a risk of a retracement after this fierce rally in gold,” Hadjikyriacos said.
Treasury yields climbed on Monday, with the yield on the 10-year note
TMUBMUSD10Y,
up nearly 12 basis points at 3.501%.
Still, Naeem Aslam, chief investment officer at Zaye Capital Markets, points out that while futures prices for gold have shied away from testing its all-time high after briefly rising above the key $2,000 mark last week, that doesn’t mean another cycle of retracement is going to begin.
There are “strong odds” of the Federal Reserve easing its hawkish monetary policy, and “it is likely that we may have already reached the peak in terms of the interest rate cycle,” said Aslam, and if not, “it is highly likely that we are not far from level now.”
That “makes the case a lot stronger for the gold price to move higher as the dollar index will begin to lose steam further,” he said.
Meanwhile, “the threat of a U.S. banking crisis or a European banking crisis is keeping traders very much on their toes,” said Aslam. “There is still a lot of lack of confidence among investors who believe that the chances are far greater for things to crash first before they recover.”
