Gold futures headed lower Wednesday as global stocks rose and the U.S. dollar recovered from a two-year low a day earlier, creating some headwinds for bullion values.
The ICE U.S. Dollar Index, a gauge of the buck against a half-dozen currencies, was up 0.5% at 92.771, with that index elevated by weakness in the euro.
The retreat by the euro followed comments from European Central Bank’s chief economist Philip Lane, who said the euro’s strength would influence policy makers’ forecast for the region’s economic growth and have an impact on monetary policy decisions. The comments came after the euro, which represents the heaviest weighting in the U.S. dollar index, reached a psychologically significant level, changing hands at $1.20.
A weaker U.S. currency can make gold more attractive to overseas buyers on a relative basis and vice versa.
“Bullion’s decline is proportional to the recovery of the greenback, confirming that the current movement is mostly related to what is happening on the currency markets,” wrote Carlo Alberto De Casa, chief analyst at ActivTrades. “In other words, the main trend for gold remains positive and a clear surpass of $1,990 and then $2,005 would open space for further rallies,” he wrote.
December gold traded $20.50, or 1%, lower at $1,958.40 an ounce, following its gain of less than 0.1% on Tuesday, which still helped to mark its highest settlement since Aug. 18 for a most-active contract, according to FactSet data.
December silver contract, meanwhile, shed 92 cents, or 3.2%, at $27.725 an ounce, after gold’s sister metal gained 0.2% in the previous session.
Beyond the dollar, the decline in precious metals prices also came as global stocks enjoyed more gains on some hope for better daily testing for COVID-19 and perceived progress in vaccines.
The S&P 500 and the Nasdaq Composite indexes touched an intraday record in Wednesday dealings, lifted amid progress in the development of tests and vaccines for COVID-19 and prospects for another fiscal stimulus package in Washington.
“There is very little risk aversion in the marketplace at present, and that’s bearish for the safe-haven metals,” said Jim Wyckoff, senior analyst at Kitco.com, in a daily note.
Traders also assessed data from ADP Wednesday that showed private-sector companies added or regained 428,000 jobs in August. Wall Street economists, however, had forecast an increase of 1 million private-sector jobs, according to Econoday.
Gold briefly pared losses in the immediate wake of the data early Wednesday, before falling toward session lows as traders await the monthly data on the U.S. employment situation due Friday. The Labor Department on Friday is likely to report the U.S. created 1.2 million new jobs in August, according to economists polled by MarketWatch.
Among other Comex metals, December copper traded at $3.009 a pound, down 0.6%. October platinum lost 4.3% to $912.70 an ounce and December shed 1.7% to $2,271.40 an ounce.