Gold and silver prices retreated on Wednesday as a stronger U.S. dollar weighed on precious metals, while investors digested a fresh batch of eurozone inflation data.
Price action
-
Gold for June delivery
GC00,
-0.62% GCM23,
-0.62%
fell by $27, or 1.3%, to $1,993 an ounce on Comex. -
May silver
SI00,
+0.54% SIK23,
+0.54%
fell by 11 cents, or 0.4%,to $25 an ounce. -
June palladium
PAM23,
-1.33%
fell by $36, or 2.2%, to $1,606 an ounce, while July platinum fell by $7.70, or 0.7%,to $1,089 an ounce. -
May copper
HGK23,
-0.53%
declined by 4 cents, or 1%, to $4.05 a pound.
Market drivers
A stronger U.S. dollar has weighed on gold in recent sessions as the ICE U.S. Dollar Index last week rebounded off its lowest level since early February, helping to curb a torrid rally in the yellow metal that saw it rise for six straight weeks.
Several other factors impeded gains in the price of gold as well, said Jim Wyckoff, senior analyst at Kitco.
“Gold and silver prices are sharply lower in early U.S. trading Wednesday, amid bearish outside market forces at midweek that see a higher U.S. dollar index, rising U.S. Treasury yields and a drop in crude oil prices,” Wyckoff said in emailed comments.
Data released on Wednesday showed that U.K. inflation is proving sticky, causing a broad selloff in government bonds that forced up yields and translated into a jump in U.S. Treasury rates.
The Office for National Statistics said consumer prices rose 10.1% year-over-year in March, down from 10.4% in February, though above economists’ forecasts for a 9.8% rate.
Read More
Metals stocks fell on Tuesday as gold prices dropped below the $2,000 an ounce mark for the first time since early August due to the strength of the U.S. dollar.
Gold, long seen as a safe investment during times of economic uncertainty, hit an intraday low of $1,996.77 an ounce, down more than 8% since the start of 2021 and the biggest one day percentage drop since June 2013. The retreat of gold below the $2,000 mark caps off a year in which the commodity bested its 12-year record of hitting past the $2,000 an ounce level in August and stayed there until early January.
A strong U.S. dollar was seen as the main culprit in gold’s decline today. The U.S. Dollar Index, which tracks the greenback against a basket of foreign currencies, rallied more than 1% after posting three consecutive weeks of losses. The appreciation of the dollar makes gold and other metals costlier for holders of other currencies, resulting in a decrease in demand for the precious metal.
The sell-off was seen across all major metals stocks, with miners such as Barrick Gold Corporation and Newmont Corp. plunging 6.6% and 5%, respectively. Base metals companies also suffered heavy losses, with Freeport-McMoRan Inc. and BHP Group falling 7% and 5%, respectively.
Analysts have started to worry about the long-term implications for gold, with some raising doubts about the sustainability of its run. While the yellow metal’s retreat was thus far concentrated within the last several weeks, traders were seen taking more bearish positions in the near-term as investors adopted a wait-and-see attitude.
Despite the recent dip, investors can still benefit from investing in metals stocks, as names such as Freeport-McMoRan Inc. and Newmont Corp. provide exposure to the sector and can thus still provide good returns. Investors should, however, pay close attention to the latest movements in the U.S. dollar as it’s likely to be a major factor in deciding the direction of metals stocks over the coming weeks.
