Gold futures took a break on Wednesday from a plodding rebound that has lifted the precious metal higher in five of the past six sessions, off the five-month lows they saw at the end of November.
The session’s pullback comes after the Trump administration proposed $916 billion in aid, including checks for hard-hit Americans, providing support for gold and other precious commodities, but as bond yields, a potential competitive drag for gold and silver, were starting to point higher on the possibility that more fiscal spending will be reflationary.
“Traders and investors are also more upbeat on the increasing likelihood the U.S. Congress will soon pass a financial aid package for Americans that totals just under $1 trillion,” wrote Jim Wyckoff, senior analyst at Kitco.com. Wyckoff.
The rollout of COVID-19 vaccines in the U.K. and perhaps soon in the U.S., as the Food and Drug Administration gets ready to review Pfizer and BioNTech’s candidate on Thursday, has limited moves in gold though, as vaccine distribution provides hope for a return to a more normal economy, lessening the need for safe-haven investments.
February gold declined $19.30, or 1%, to reach $1,855.60 an ounce, after rising 0.5% on Tuesday, marking the highest settlement for a most-active contract since Nov. 17, according to FactSet data. Prices had ended the month of November at their lowest since July 1.
Meanwhile, March silver shed 46 cents, or 1.9%, to $24.275 an ounce, after a 0.2% decline in the previous session.
The next week will be “very interesting for gold,” with the European Central Bank announcing its latest monetary policy decision Thursday and the U.S. Federal Reserve doing the same next week, said Craig Erlam, senior market analyst at Oanda, in a market update. “More stimulus is surely on the cards for both — it’s just a question of how much with both economies facing an extremely challenging winter.”
Gold “forced its way” through $1,850, peaking around $1,875, before profit taking kicked in,” he said. Still, “while the prospects for gold may be good if the Fed and ECB overdeliver, I do wonder if we’re going to see a little more downside in the near-term.”
Yields for the U.S. 10-year Treasury note yield were helping to weigh on the commodities, rising over 3 basis points to 0.94%. Rising yields can undercut appetite for precious metals which don’t offer a coupon.
Meanwhile, bullish gold investors say that a persistent weakening trend in U.S. dollars, which many commodities are priced in, will underpin higher values for gold, silver and other precious assets that are purchased using weaker currencies.
The ICE U.S. Dollar Index on Wednesday was off 0.1% but wasn’t far from its 2 1/2 year low.
Among other metals traded on Comex, March copper edged up by 0.4% to $3.515 a pound. January platinum fell by 0.6% to $1,030.40 an ounce and March palladium traded at $2,297.50 an ounce, down 1.3%.