Gold prices traded higher Tuesday, buoyed in part by a decline in Treasury yields, after the most-active futures contract briefly touched its lowest level since March overnight.
Price action
-
Gold futures for August delivery
GC00,
+0.77% GCQ23,
+0.77%
gained $8.70, or 0.4%, to trade at $1,971.80 per ounce on Comex. The price touched $1,931 an ounce at around 2 a.m. Eastern Time. -
Silver futures for July delivery
SI00,
-0.26% SIN23,
-0.26%
were off by 12.5 cents, or 0.5%, at $23.235 per ounce. -
Palladium futures for September
PAU23,
-2.25%
was off by $31.60, or 2.2%, to $1,394.50 per ounce, while platinum futures for July delivery
PLN23,
-0.33%
lost 80 cents, or nearly 0.1%, to $1,027.30 per ounce. -
July copper
HGN23,
-0.48%
was down 2.2 cents, or 0.6%, at $3.66 per pound.
Market drivers
Gold prices have retreated for most of May as the dollar has strengthened and Treasury yields have risen partly driven by the lack of progress on a U.S. debt ceiling deal in Congress, though an agreement announced Saturday night allowed bill yields to ease Tuesday.
“It looks increasingly likely that Congress will pass a debt deal to prevent a default,” said Fawad Razaqzada, market analyst at StoneX.
Read: Why gold still has a shot to reach a record high this year
Over the weekend, President Joe Biden and House Speaker Kevin McCarthy reached a deal to raise the U.S. federal government’s debt limit. The agreement must now pass both chambers of Congress, where it is expected that centrists from both parties will band together to pass it.
“Investors’ required rate of return has thus fallen by holding U.S. government debt, as the risk of default has fallen in their eyes. This is reflected in falling bond yields,” Razaqzada said in a market report. “As yields dip, up goes the appeal of zero-yielding assets on a relative basis.”
The yield on the 10-year Treasury note
TMUBMUSD10Y,
was off by 6.7 basis points at 3.738%.
However, expectations for another interest rate rise from the Federal Reserve in June have risen after Friday’s U.S. inflation data.
The U.S. dollar
DXY,
has risen over the past month, but a closely watched gauge of the greenback’s value against major currencies was trading slightly lower on Tuesday. The ICE U.S. Dollar Index was off by 0.2% at 104.03. Weakness in the greenback can provide support for dollar-denominated prices of gold.
Overall, “a resurgent dollar and relief that a U.S. debt ceiling deal has finally been reached have left their marks on gold, which sliced below the $1,935/oz region earlier today to hit its lowest levels in six weeks,” said Marios Hadjikyriacos, senior investment analyst at XM, in emailed commentary.
“It is a troublesome environment for bullion, as the steepening of the Fed’s implied rate trajectory has simultaneously turbocharged the dollar and propelled Treasury yields higher, both of which make the nonyielding metal that is denominated in U.S. dollars less attractive,” he added. Gold futures remain lower month to date.
