Gold futures were heading sharply lower Wednesday morning, as U.S. Treasury yields resumed their rise and the dollar firmed, following the first gain for the precious metal in six sessions on Tuesday.
Gold for April delivery on Comex GC00,
Analysts at UBS make the case that higher nominal yields, with the 10-year Treasury note TMUBMUSD10Y,
“Higher nominal and real US bond yields have hurt gold recently, while ongoing ETF outflows should remain the key challenge for this year,” wrote UBS strategists in a note dated March 2, referring also to monthly data showing that gold via exchange-traded funds is being sold heavily.
The analysts said that they could foresee gold scoring a bounce in the shorter run but are growing more bearish to neutral on the asset in the longer term, against a backdrop of rising yields and expectations that further U.S. fiscal stimulus will boost the economy and inflation.
“But we anticipate recent headwinds to intensify again into 2H, particularly as greater US stimulus raises the prospect of an earlier-than-planned Fed rate hike” wrote the UBS analyst.
For that reason, UBS has lowered its gold forecasts by $150 per ounce,
bringing end-June to $1,750/oz, end-September to $1,700, and end-December and end-March 2022 to $1,650.
On Wednesday, gold took a slight leg lower after private-sector payroll data from Automatic Data Processing, rose by 117,000 jobs in February after increasing 195,000 in the prior month. Economists polled by the Wall Street Journal had forecast a gain of 225,000 private sector jobs in February.
Meanwhile, May silver SI00,
