Gold futures set for sharpest daily tumble in a month as Treasury yields and U.S. dollar rise

The slump for the yellow metal comes as the dollar, as gauged by the ICE U.S. Dollar Index DXY, +0.42%, was trading at 92.29, up 0.3%. A stronger dollar can make assets priced in the currency, such as gold, less attractive to investors using other currencies.

Meanwhile, benchmark bond yields, which can compete for haven flows against gold, were rising, increasing its appeal when pitted against bullion. The 10-year Treasury note TMUBMUSD10Y, 1.371% was yielding 1.37%, versus 1.322% last Friday. Treasury markets were closed on Monday in observance of U.S. Labor Day.

On Friday, U.S. data showed a lower-than-expected increase in new U.S. jobs in August, prompting prices for the precious metal to notch a gain for the week and mark their highest finish since mid-June, but markets were coming under pressure to start the holiday-abbreviated week.

Trading for gold has come against the backdrop of concerns about the delta variant of the COVID-19, which have supported its price moves and uncertainty about the Federal Reserve’s monetary-policy plans, as the labor-market recovery looks uneven. The fact that easy-money policies have remained in place has helped equity markets rise repeatedly to record highs, undercutting demand for bullion, some strategist argue.

“Gold is finding new interest, but the precious metal is caught between a very confused economic outlook and the relentless new record highs in equities,” wrote Adrian Ash, director of research at BullionVault, in a research report.

Gold bulls argued that Tuesday’s slide represented investors taking profit after last week’s solid rally.

Alex Kuptsikevich, senior financial analyst at FxPro, said that gold supporters should be heartened by gold remaining above the psychologically significant level at $1,800.

The analyst said that gold imports remain strong and speculated that demand would pickup for bullion during periods of seasonal strength for prices, including Christmas.

“It is also worth noting that in August, the volume of gold imports reached the highest levels in the last five months…The favorable conditions for this were created by high market demand and attractive prices, which also prompted jewelers to increase purchases in advance in anticipation of the upcoming Christmas season,” said Kuptsikevich, in a note.

Meanwhile, silver prices for December delivery SIZ21, -1.56% were trading 50 cents, or 2.1%, lower at $34.29 an ounce.