Gold futures on Monday were headed firmly lower, capping a troubling month for the haven asset that puts it on track to log its lowest settlement since late June.
February gold was trading $16.30, or 0.9%, lower at $1,771.80, after futures lost over 4% last week, marking its steepest weekly slide since Sept. 25, based on the most-active contract. Monday’s decline would place the metal at around its lowest price since late June.
The precious metal is now trading 2% below its long-term, 200-day moving average that stands at $1,806.15, according to FactSet data.
The skid for gold has mostly come on the back of reinvigorated enthusiasm for assets perceived as risky, like stocks, as apparent progress on vaccines has emboldened bullish equity investors, driving buying away from safe-haven bullion.
On Monday, Moderna Inc. provided the latest update on potentially effective remedies for the deadly pandemic derived from the novel strain of coronavirus, saying its experimental drug showed 94.1% efficacy in final trials and that it plans to request an emergency use authorization from the U.S. Food and Drug Administration, as early as Monday for the COVID-19 vaccine candidate that could see it available to front-line workers in the coming weeks.
The positive news weighed on dollar-pegged precious metals, even as the buck continued a trend of weakness that would ordinarily bolster the case for foreign buyers, using weaker currencies, to purchase the precious commodity.
The ICE U.S. Dollar Index a measure of the greenback against a half-dozen currencies, was down 0.1% at 91.694, touching its lowest level since around April of 2018. The dollar is down 2.5% so far this month, while gold futures are off more than 6%.
“Gold has fallen another 1% even as the US dollar has also extended its declines and the equity markets have started the new week slightly weaker,” wrote Fawad Razaqzada, market analyst at ThinkMarkets, in a Monday research note.
The analyst, however, believes that gold’s decline may be capped at around this point as the dollar weakens.
“If the weakness for the dollar persists, this should prevent gold prices [from falling] further,” he said, also noting that government bond yields also have seen tepid moves. Lower yields can also buoy gold buying because the commodity doesn’t offer a coupon.
The 10-year Treasury rate was yielding 0.85% on Monday. Bond prices and yields move in opposite directions.
“What’s more, government bond yields have stopped going higher as investors realize the road to economic recovery is going to be a long bumpy one, despite optimism surrounding vaccines and hopefully the potential return to normal life,” Razaqzada said.
March silver the new most-active contract, lost 51 cents, or 2.3%, to trade at $22.125 an ounce, after silver also registered its sharpest weekly fall since late September on Friday.
Gold is down over 6% so far this month, while silver is headed for a nearly 7% decline.