Gold contracts trading on Comex were headed higher Monday, shaking off a surge in government bond yields and leading some dealers to suggest that beaten-down bullion may be drawing safe-haven-like demand as investors appear momentarily rattled by the rise in borrowing costs across the globe.
“Rising real rates accompanied by a firmer dollar would normally be a death sentence for the yellow metal, but bullion is instead cruising higher on Monday, which suggests it is behaving like a safe-haven again,” wrote Marios Hadjikyriacos, investment analyst at XM in a daily note.
April gold on Monday was up $20.60, or 1.2%, to reach $1,797.90 an ounce, after on Friday putting in the sharpest weekly skid, down 2.5%, since the period ended Jan. 8, FactSet data show.
Monday’s move come as the 10-year Treasury note was yielding 1.35%, at last check, and pushing toward a psychologically important level at 1.40%. That jump in yields compared against the past couple of weeks has weighed on equities, with the Dow Jones Industrial Average and the S&P 500 index weighed by the prospect of higher borrowing costs emerging from the COVID-19 pandemic.
Bond yields have primarily been boosted by expectations that aggressive rounds of fiscal spending on top of extraordinary loose monetary policy by the Federal Reserve will stoke at least near-term inflationary pressures.
Commodity experts say that expectations for stronger growth has driven up yields but uncertainty on how that will impact stocks, seen as richly valued, has driven investors into the perceived safety of bonds, particularly as government debt skids lower.
“This rebound can be explained in correlation with stock indexes in the red,” wrote Carlo Alberto De Casa, chief analyst at ActivTrades, in a daily note.
“From a technical point of view, the bearish trend of the last few days is losing strength but a proper inversion would require a solid recovery of $1,800,” the analyst wrote.
Meanwhile, March silver tacked on 26 cents, or nearly 0.9%, to $27.51 an ounce, after posting a slight weekly retreat last week.