• Gold prices ended lower Thursday as a global rise in government bond yields diminished the appeal of investing in precious metals that don’t bear interest.
• Gold for August delivery on Comex GCQ7, -0.02% slipped $3.30, or 0.3%, to settle at $1,245.80 an ounce, after notching back-to-back gains Wednesday. September silver SIU7, -0.02% ticked down by 13.7 cents, or0.8%, to $16.654 an ounce.
• Moves were fueled in part by a world-wide selloff in bonds that pushed prices of sovereign paper lower and yields higher. Yields on U.S. Treasurys, notably the 10-year note, TMUBMUSD10Y, -0.12% and European bonds, like the comparable German bond TMBMKDE-10Y, +0.00% shot to their highest levels in more than a month. The 10-year Treasury note was at 2.27%, compared with 2.146% to start the week, while the 10-year German bond, known as the bund, was yielding 0.43%, compared with 0.254% at the start of the week.
A rise in yields can undercut appetite for metals like gold and silver.
• “In recent days, we’ve seen a global bond selloff, including U.S. Treasurys, that has lifted [market] interest rates in a manner that’s bearish for gold,” Brien Lundin, editor of Gold Newsletter, told MarketWatch.
• A recent spate of comments from central bankers across the globe, including European Central Bank President Mario Draghi, and the Bank of England’s Mark Carney, suggest that after a period of ultralow, accommodative monetary policy some major central banks may be setting the stage to remove measures that have been viewed as a safety net for markets. Recent central-bank remarks, perceived as hawkish, come as the Federal Reserve also has been attempting to normalize its monetary regime in the wake of the 2008-’09 financial crisis.
• On Thursday, St. Louis Fed President James Bullard said the current level of interest rates is appropriate for a low-growth, low-inflation regime.
• Goldman Sachs analysts led by Jeff Currie in a Thursday research note said they expect the rise in rates to pressure gold.
“We have a balanced gold outlook with our 6/12 month forecasts at $1250/oz. On the one hand, we expect higher US real rates and Fed balance sheet reduction to put downward pressure on gold,” the Goldman note said. That said, pressure on the yellow metal may be offset by weak U.S. global growth, appetite for precious metals from emerging markets amid expected softness in the dollar, and peak supply late in 2017—”making gold more attractive to longer-term investors.”
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