Gold futures on Wednesday morning were headed slightly higher, as the precious metal attempts to finish in positive territory for the first time in four sessions.
The modest rise for bullion comes as the dollar has softened, even as Treasury yields remain perky.
At last check, February gold
GCG22,
GC00,
was adding $7.20, or 0.4%, to reach $1,819.60 an ounce, following a 0.2% decline on Tuesday. The commodity has settled lower in the past three trading days.
The rise in yields, with the 10-year Treasury note yield
TMUBMUSD10Y,
rising near 1.90%, has helped to undercut appetite for precious metals, which compete against government debt for haven debt but don’t offer buyers a coupon.
However, turbulence in the equity markets and weakness in the dollar, which the commodity is usually priced in, has helped to mitigate some of its decline, strategists said. The ICE U.S. Dollar Index
DXY,
a measure of the dollar against a half-dozen major currencies, was trading 0.2% lower on Wednesday but has been up 0.4% this week.
“The rise in treasury yields and expectations of higher interest rates are having a negative toll on gold prices,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily note.
“However, higher volatility and slump in equity markets has helped the precious metal to cap its losses to some extent,” the analyst said. The Dow Jones Industrial Average
DJIA,
the S&P 500 index
SPX,
and the Nasdaq Composite Index
COMP,
are all down sharply for the week and the month, so far.
The prospects of a series of interest-rate hikes by the U.S. Federal Reserve has had the greatest negative effect on gold because higher rates dull the appeal of nonyielding gold and silver. The rate-setting Federal Open Market Committee next gathers on Jan. 25-26.
“Investors should understand that higher interest rates raise the opportunity cost of holding the non-interest bearing asset, making it less appealing for investors,” Aslam said.
Meanwhile, silver for March delivery
SIH22,
was rising 29 cents, or 1.3%, higher to trade at $23.78 an ounce, following a 2.5% gain on Tuesday.
Silver, which also draws buyers who look at gold’s sister metal as a partial industrial asset, is looking at a 3.7% weekly advance. Gold futures are up around 0.1% so far this week.
