Gold Futures Struggle for Loft As Rising U.S. Dollar Keeps Bullion Under Pressure

The dollar was up 0.1% on the session, and up 1.2% on the week, headed for its sharpest weekly gain since June, as measured by the ICE U.S. Dollar Index DXY, -0.00%, while the 10-year Treasury yields TMUBMUSD10Y, 1.533% fell to 1.525% from 1.54% on Wednesday. A stronger dollar can make assets priced in the currency comparatively more expensive to overseas buyers and rising yields can make the precious metals, which don’t offer a coupon less attractive than bonds.

Gold bulls point to intensifying worries about inflation, concerns about China’s economic recovery and a White House at loggerheads over the U.S. debt ceiling as factors that should be delivering more of a jolt to bullion.

However, the rise in the U.S. dollar to around the highest levels since last fall, gains in yields, as inflation anxieties percolate, and increasing anxieties about the tapering of the Federal Reserve’s market-supportive asset purchases are all combining to buffet precious metals.

“Nevertheless, the precious metal remains under pressure from a strengthening US dollar, as earlier than expected tapering by the Fed and rising Treasury yields, as well as the greenback’s own refuge asset appeal, are likely to create more upside for the American currency,” wrote Ricardo Evangelista, senior analyst at ActivTrades in a research note.  

The yellow metal is on track for a monthly decline of 5.1%, its sharpest such drop since June, and a quarterly skid of 2.2%, representing the steepest quarterly fall since the first quarter of this year.

December silver SIZ21, +2.14%, meanwhile, was up 9 cents, or 0.4%, at $21.57 an ounce, following a 4.4% tumble on Wednesday, pushing gold’s sister metal to the lowest settlement since July 2020.

For the month, silver is set for a decline of over 10%, which would be its steepest monthly fall since September of 2020, contributing to a quarterly drop of over 16%, marking its most severe quarterly decline since the first quarter of 2020.

Another factor likely to provide some headwinds for gold was bad data out of the world’s second-largest economy in the world: China. China’s manufacturing purchasing managers index fell to 49.6 in September, the National Bureau of Statistics in Beijing said Thursday, marking its first drop in activity, a reading of at least 50 indicates expansion, since February.

Weakness in China can weigh on gold, and other commodities, because the country is one of the largest buyers of precious metals.