Gold prices retreated on Wednesday as the U.S. dollar strengthened and as stocks across the globe mostly advanced, suggesting some waning appetite for bullion.
However, gold trading of the past several days has been erratic, with the commodity sometimes trading out of sync with its normal correlations with equities and bond yields, which have both been rising over the week—a scenario that should create a headwind for precious metals.
On the day, August gold GCQ20, -0.54% was off $12.80, or 0.7%, at $1,723.90 an ounce, on Comex, after the metal rose 0.5% on Tuesday, notching its first gain in three sessions. Gold futures have been trading in a $1,670 to $1,770 range for about two months despite a sharp fall in the U.S. dollar DXY, 0.21% against major currencies in that time.
For the week thus far, gold is off 0.8%, while silver has risen 0.9%, according to FactSet data.
The U.S. dollar was up 0.2% on Wednesday, as gauged by the ICE U.S. Dollar Index DXY, 0.21%, a measure of the buck against a half-dozen currencies. For the week, however, the index is off 0.2%. A weaker dollar should ordinarily provide support for assets priced in the monetary unit.
Meanwhile, bond yields, which move in the opposite direction to prices, have been rising somewhat, perhaps providing a counter to the dollar moves and creating some friction for precious metals which don’t bear a coupon. The 10-year Treasury note yield TMUBMUSD10Y, 0.751% was at 0.76% after finishing last Friday at 0.698%.
Moves for metals also come as stocks broadly were buoyant as investors appeared to take heart in efforts under way to reopen economies shutdown to curtail the spread of coronavirus. On top of that, a report of a potential treatment for COVID-19 also has softened some appetite for safe-haven assets.
Investors attributed gains for precious metals on Tuesday partly to signs of rising tensions on the Korean Peninsula, with a report that North Korea blew up an inter-Korean liaison office in the western border town of Kaesong.