Gold prices were headed higher Wednesday, with investors attributing its modest rise in the session to an attempted recovery from recent selling in the precious metal and its sister commodity silver.
“Gold is range trading and at the moment testing out support at $1,830,” said Ross Norman, chief executive officer of Metals Daily, told MarketWatch. “Its price action, while silver rallied, was muted — suggesting sentiment in the broader complex was skeptical of silver. By that I mean the premise that there was a large silver short out there — there isn’t — and the proof of that is that there was no short covering rally.”
Precious metals settled sharply lower a day ago after the Commodity Futures Trading Commission and the CME Group said they would monitor and tighten restrictions on trade in silver, and gold, with dealers blaming individual investors for using social-media platforms like Reddit to drive futures prices in metals higher.
On Comex, April gold edged up by $2.20, or 0.1%, to $1,835.60 an ounce, after the metal tumbled 1.6% on Tuesday.
Silver futures for March delivery tacked on 55.8 cents, or 2.1%, $26.96 an ounce, following an over 10% decline for futures in the previous session. Prices on Monday settled at their highest in about eight years.
Wednesday’s rebound, however, is viewed by some market strategists as limited by a firmer dollar and rising bond yields, which can serve as potential headwinds for the assets in the short term.
“It will be interesting to see if the metal does actually break down because over the past few years it has been correlating positively with the stock markets,” wrote Fawad Razaqzada, analyst at ThinkMarkets, in a research note. “ In truth, a lot depends on the yields now,” he wrote.
The 10-year Treasury yield was at around 1.12%, up over 2 basis points, while the dollar was down less than 0.1%, but trading higher for the week, as gauged by the ICE U.S. Dollar Index.
Higher rates and a stronger buck can undercut appetite for silver and gold, which don’t offer a coupon and are priced in U.S. dollars.
Gold is indeed being restrained by dollar firmness and nominal yields are also rising, said Norman, and in short, “gold is biding its time” as the market waits to see how the so-called blue wave plays out.
Bullish investors, however, make the case the accommodative policies to limit the economic harm from the COVID-19 pandemic will help to buoy gold prices in the longer term.
The economy in the U.S. was staging a recovery as highlighted by a private-sector reading from Automatic Data Processing that showed 174,000 jobs added in January, after shedding a revised 78,000 in the prior month. Economists polled by The Wall Street Journal forecast a gain of 48,000 private sector jobs in January.
However, the pace of economic recovery is halting considering the millions of jobs that have been lost front the peak of the public health crisis.
Separate data Wednesday showed that the service side of the domestic economy grew faster in January. The ISM services index rose to 58.7% from a revised 57.7% in the prior month, the Institute for Supply Management said Wednesday.
Rounding out action on Comex Wednesday, March copper rose 1.2% to $3.567 a pound. April platinum rose 1.1% to $1,107.80 an ounce and March palladium added 1.3% to $2,257.50 an ounce.