Gold futures on Thursday were extending a rise to the highest level in a month, briefly touching the $1,800 level and heading for the sharpest weekly gain in about five months.
Gains in bullion and other precious metals have come as the U.S. dollar and Treasury yields have staged a modest pullback. However, some analysts believe that gold’s ascent will be capped by the likelihood that Treasury yields will eventually resume their climb as the Federal Reserve kicks off its tapering of monthly purchases of government debt and mortgage-backed securities before year-end.
At last check, December gold
was trading at $3.80, or 0.1%, $1,798.50 an ounce in early U.S. trade, with intraday high at $1,801.90, following a 2% gain on Wednesday, which sent most-active contracts to their highest settlement since Sept. 15, FactSet data show. If the contract can close above 1,794.80, it will mark it highest close since Sept. 14, FactSet data show.
“Although the yellow metal has attempted to rise, the momentum is insufficient to achieve significant gains as Treasury yields continue to surge as investors expect tapering to begin in 2021,” wrote Naeem Aslam, chief market analyst at Oanda Corp. in a daily research note.
On Wednesday, minutes from the Federal Reserve’s most recent policy gathering in September confirmed that central-bank officials discussed a plan to reduce the pace of asset purchases by $15 billion a month and are considering launching reductions next month or the following.
The Fed’s No. 2 Richard Clarida had already signaled earlier this week that the economic recovery from COVID-19 had essentially met the criteria necessary to announce a reduction of monthly asset-purchases of Treasurys and mortgage-backed securities that have been in force since June of 2020.
Tapering of the Fed’s asset purchases, and the eventual conclusion of such buys in the middle of 2022, is expected to lift bond yields, making government debt more competitive compared against precious metals that don’t offer a coupon.
Moves for precious metals may also encounter some headwinds from a rally in global stocks. The Dow Jones Industrial Average
the S&P 500 index
and the Nasdaq Composite Index
were all poised to rise solidly on Thursday, signaling that investors were favoring assets perceived as risky versus those considered havens.
Relatively lower-bound yields, suggesting that borrowing costs remain subdued, were helping to buoy stocks. The 10-year Treasury note
yields 1.535%, versus 1.549% on Wednesday.