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Metals Stocks: Gold suffers sharpest daily tumble in a month, settles below $1,800

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Gold futures decline Tuesday, with their sharpest daily fall in about a month, pulling prices back below $1,800 as the U.S. dollar strengthened and Treasury yields climbed, weighing on appetite for precious metals.

The drop in prices is a “reaction to dollar strength and rising Treasury yields,” Michael Armbruster, managing partner at Altavest, told MarketWatch.

If the Federal Reserve’s Beige Book report due Wednesday “suggests that the U.S. economy is cooling, then that would be a bullish factor for gold,” he said. For now, “we still like buying gold on dips below $1,800.”

On Tuesday, December gold
GCZ21,
-1.82%

GC00,
-1.82%

declined by $35.20, or 1.9%, to settle at $1,798.50 an ounce. The drop marked the sharpest one-day percentage and dollar slide for a most-active contract since Aug. 9 and pushed the contract to the lowest settlement since Aug. 26, FactSet data show.

The decline follows a 0.8% rise for bullion last week, with prices settling Friday at their highest since June 16.

The weakness in gold may be a “classic ‘give back’ of an overdone reaction to the [Federal Reserve’s] likely hold stance following a serious ‘miss’ on the August U.S. payroll report,” analysts at Zaner wrote in a note.

U.S. data released Friday showed a lower-than-expected increase in new U.S. jobs in August, prompting prices for the precious metal to rise.

Traders expect a dollar rebound this week said analysts at Zaner. Investment interest in the gold exchange-traded fund remains “very poor,” with total ETF gold holdings at the end of last week 6.8% lower on the year, U.S. Treasury yields jumped Tuesday, and Chinese official gold holdings declined by 0.6% last month versus July, they said.

The dollar, as gauged by the ICE U.S. Dollar Index
DXY,
+0.47%
,
was trading at 92.48, up 0.5% in Tuesday dealings. 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 1.369%, versus 1.322% last Friday. Treasury markets were closed on Monday in observance of U.S. Labor Day.

Trading for gold has come against the backdrop of concerns about the delta variant of the COVID-19, which have supported 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.

Meanwhile, gold imports remain strong in August, with the volume of gold imports reaching the highest levels in the last five months, said Alex Kuptsikevich, senior financial analyst at FxPro.

“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 for December delivery
SIZ21,
-1.52%

settled 43 cents, or 1.7%, lower at $24.37 an ounce.

December copper
HGZ21,
-1.33%

also fell 1.2% to $4.28 a pound. October platinum
PLV21,
-2.52%

shed 2.5% to $995.90 an ounce and December palladium
PAZ21,
-2.21%

settled at $2,353.50 an ounce, down 2.6%.

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