Futures for gold on Friday headed for a fourth straight decline, putting bullion on track to notch its second losing streak of that length this month, as a sharp rise in government bond yields has undercut demand for the precious metal.
The yellow metal is also on track for its second straight weekly drop and its second straight monthly loss, with February on pace to mark bullion’s steepest such slide since November, FactSet data show.
On Friday, the metal was extending its slide as a perkier dollar combined to provide a further drag, with gold for April delivery traded on Comex off $12.50, or 0.7%, to $1,762.90 an ounce, following the metal’s 1.3% skid on Thursday.
“Gold is in trouble once more and the near-term outlook isn’t looking great for the yellow metal,” wrote Craig Erlam, senior market analyst at Oanda, in a daily research note.
A surge in yields, representing higher borrowing costs and a richer risk-free rate of return in fixed-income investments, has forced investors to reassess the composition of their portfolios, putting pressure on assets that don’t offer a yield versus government debt.
A firmer dollar on Friday, with the buck up 0.5% as gauged by the ICE U.S. Dollar Index, was also weighing on bullion.
“Rising yields and now a jump in the dollar are piling the pressure on gold and, barring a reversal in bond markets, it’s tough to envisage its fortunes improving,” wrote Erlam.
On Thursday, the 10-year benchmark Treasury note, touched a yield near 1.54% intraday, compared with 1.34% last Friday. The 5-year Treasury, meanwhile, surged by the most since 2010, Dow Jones Market Data show.
For the week, gold is on pace for a weekly decline of 0.9%, silver is set for a weekly skid of 1.5%. For the month, gold is headed for a 4.9% decline, while silver is on pace for 5.1% gain, given that the asset is also seen as an industrial metal and tends to draw bids on expectations of an improving economy.
Vaccine rollouts and hope for a bounce back from the COVID-19 pandemic in the second half of 2021 has been one of the key drivers for the selloff in bonds, with prices falling as yields rise.