Gold futures end lower as Treasury yields pop higher

The 10-year Treasury note was yielding TMUBMUSD10Y, 1.212% 1.21% on Thursday afternoon, still holding near its lowest levels since February, but off its Wednesday intraday nadir at 1.1255%. The rise in Treasury yields can also undercut the appeal of gold compared against precious metals that don’t offer a coupon.

The decline for gold also comes as the Dow Jones Industrial Average DJIA, +0.53%, the S&P 500 index SPX, +0.40% and the Nasdaq Composite Index COMP, +0.70% were rallying, trading at or near record highs and underscoring a weaker appetite on the session for assets perceived as havens like gold and bonds.

Commodity analysts also have pointed to bullion’s correlation with the U.S. dollar as one of the biggest recent catalysts for recent price action. The dollar was down 0.1% on Thursday, as measured by the ICE U.S. Dollar Index DXY, -0.01%, and is flat to slightly higher on the week thus far.

“Gold’s inverted correlation with the US dollar continues to condition the performance of the precious metal, which is slightly down during early Thursday trading in an almost exact mirror image of what is happening to the greenback,” wrote Ricardo Evangelista, senior analyst at ActivTrades, in a daily note.

A weaker dollar can make precious metals priced in the currency more attractive to overseas buyers.

The dollar scored some support Wednesday when Fed vice-chair Richard Clarida said tapering of the central bank’s bond purchases could be in the offing soon and economic conditions in the rebound from the COVID pandemic may even allow an interest rate increase in late 2022 or early 2023.

Commodity investors also parsed economic reports on Thursday that showed that first-time claims for unemployment benefits last week fell to 385,000, down 14,000 from the previous week and in line with forecasts, while continuing claims fell below 3 million for the first time since March 2020. 

Investors are seen positioning ahead of the nonfarm payrolls report for July due Friday. Economists polled by The Wall Street Journal expect 845,000 nonfarm jobs were created last month.

ActivTrades’ Evangelista says that a weak jobs report on Friday, falling below economists’ expectations for an 845,000 gain could help boost bullion, while a better-than-expected labor reading may deliver a jolt to the buck and pressure gold lower.

“Should Friday’s non-farm payrolls meet or exceed the consensus number of 900,000, fears over the state of the US labour market, which has been at the center of the Fed’s attention, may start to dissipate, with the dollar likely to find more support and send gold in the opposite direction,” the ActivTrades analyst wrote.

Meanwhile, silver for September delivery SIU21, -0.89% SI00, -0.89% traded 16.9 cents, or 0.7%, lower to end at $25.292 an ounce, after declining 0.5% on Wednesday.

In other metals, September copper HGU21, +0.29% edged up 1.55 cent, or 0.4%, to settle at $4.34880 a pound on Comex. October platinum PLV21, -1.71% lost $15.60 to end at $1,005.70 an ounce, a decline of 1.5%, while palladium for September delivery PAU21, -0.10% picked up $3.40, or 0.1%, to settle at $2,655.10 an ounce.