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Metals Stocks: Gold futures set for sharpest daily tumble in a month as Treasury yields and U.S. dollar rise

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Gold futures were headed for the sharpest daily fall in about a month on Tuesday as the U.S. dollar strengthened and Treasury yields climbed, weighing on appetite for precious metals.

December gold futures
GCZ21,
-1.07%

GC00,
-1.07%

were trading $21.20, or 1.2%, lower at $1,812.50 an ounce, putting the precious metal on track for the sharpest one-day slide since Aug. 9, FactSet data show. The decline follows a 0.8% rise for bullion last week, based on most-active contract, with prices settling touching their highest since June 16.

The slump for the yellow metal comes as the dollar, as gauged by the ICE U.S. Dollar Index
DXY,
+0.37%
,
was trading at 92.29, up 0.3%. A stronger dollar can make assets priced in the currency, such as gold, less attractive to investors using other currencies.

Meanwhile, benchmark bond yields, which can compete for haven flows against gold, were rising, increasing its appeal when pitted against bullion. The 10-year Treasury note
TMUBMUSD10Y,
1.368%

was yielding 1.37%, versus 1.322% last Friday. Treasury markets were closed on Monday in observance of U.S. Labor Day.

On Friday, U.S. data showed a lower-than-expected increase in new U.S. jobs in August, prompting prices for the precious metal to notch a gain for the week and mark their highest finish since mid-June, but markets were coming under pressure to start the holiday-abbreviated week.

Trading for gold has come against the backdrop of concerns about the delta variant of the COVID-19, which have supported its price moves and uncertainty about the Federal Reserve’s monetary-policy plans, as the labor-market recovery looks uneven. The fact that easy-money policies have remained in place has helped equity markets rise repeatedly to record highs, undercutting demand for bullion, some strategist argue.

“Gold is finding new interest, but the precious metal is caught between a very confused economic outlook and the relentless new record highs in equities,” wrote Adrian Ash, director of research at BullionVault, in a research report.

Gold bulls argued that Tuesday’s slide represented investors taking profit after last week’s solid rally.

Alex Kuptsikevich, senior financial analyst at FxPro, said that gold supporters should be heartened by gold remaining above the psychologically significant level at $1,800.

The analyst said that gold imports remain strong and speculated that demand would pickup for bullion during periods of seasonal strength for prices, including Christmas.

“It is also worth noting that in August, the volume of gold imports reached the highest levels in the last five months…The favorable conditions for this were created by high market demand and attractive prices, which also prompted jewelers to increase purchases in advance in anticipation of the upcoming Christmas season,” said Kuptsikevich, in a note.

Meanwhile, silver prices for December delivery
SIZ21,
-1.70%

were trading 50 cents, or 2.1%, lower at $34.29 an ounce.

Need to Know: Investors are ignoring the parallels between stocks today and ‘heady’ years of 1929, 1999 and 2007. Do this next, says strategist.

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