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Gold Futures Hold near Lowest Levels in a Month

Gold futures moved modestly lower on Tuesday, holding ground near their lowest prices in a month, ahead of a policy update from the Federal Reserve due Wednesday, which could set the tone for financial markets over the next few months.

Prices for the precious metal “collapsed like a tower of Jenga yesterday as jitters around the Federal Reserve outlining a path for scaling back emergency stimulus weighed heavily on the precious metal,” said Lukman Otunuga, senior research analyst at FXTM, in a market update.

“Where the metal ends this week is likely to be heavily influenced by the Fed monetary policy meeting,” he said. The Fed will conclude its two-day meeting with a policy statement on Wednesday.

“If the central bank remains dovish and continues to preach the ‘transitory’ mantra, this could inject gold bugs with fresh inspiration to challenge the $1,900 psychological level,” said Otunuga. “Alternatively, any hint of tapering discussions or presence of hawks in the meeting could deal a blow to gold prices,” potentially dragging prices back below the $1,855 level.

Gold for August delivery GCQ21, -0.21%   GC00, -0.21% was down $2.40, or 0.1%, at $1,863.50 an ounce. Prices declined by 0.7% on Monday to the lowest finish since May 14 for the most-active contract, FactSet data show.

July silver SIN21, -1.14% SI00, -1.14% declined by 34 cents, or 1.2%, to $27.70 an ounce.

Pressure on bullion this week has come as Treasury yields have gained slightly, with the 10-year Treasury yield TMUBMUSD10Y, 1.506% at around 1.50% on Tuesday.

“U.S. Treasury yields have bounced back from their recent lows, suggesting that some players are wary of the Fed signaling it is thinking about talking about tapering soon. Gold is in this camp too, with the precious metal struggling for altitude lately,” said Marios Hadjikyriacos, investment analyst at XM.

Gold prices are down by more than 1% so far in 2021 and have struggled to sustain altitude above $1,900 in recent trade.

Treasury yields have been relatively subdued and the fact that gold hasn’t been able to climb substantially higher in that environment raises concerns for bulls, Ipek Ozkardeskaya, senior analyst at Swissqwote, said.

“If the combination of subdued yields and high inflation couldn’t bring gold bulls to the party, then there’s more interest in riskier and better-rewarding assets,” the analyst said.  

Gold prices moved up in the immediate wake of U.S. retail sales and producer price index data.

U.S. retail sales showed a drop of 1.3% in May, suggesting the country is no longer getting a big boost from massive federal fiscal stimulus but consumers are still spending a lot more now than they did a year ago.

U.S. wholesale prices jumped in May for the fifth month in a row in a sign that inflationary pressures tied to the reopening of the U.S. economy are likely to persist through the summer. The producer price index rose 0.8% last month.

Also, the New York Fed’s Empire State business conditions index fell 6.9 points to 17.4 in June, while U.S. industrial production rebounded 0.8% in May.

Other metals traded on Comex moved lower, with July copper HGN21, -3.74% down 3.8% at $4.35 a pound. July platinum PLN21, -1.35% shed 1.3% to $1,150.50 an ounce and September palladium PAU21, +0.27% traded at $2,755 an ounce, down nearly 0.1%.

Source: Marketwatch

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