Gold futures headed higher Monday to start the month of March with a gain, as pause in the rise of U.S. Treasury yields prompted prices for the metal to stage a partial rebound in the wake of four consecutive session declines.
“Gold has found support from heavy bargain hunting as well as a pause in the bond sell-off,” Adrian Ash, director of research at BullionVault, told MarketWatch.
Bond prices move inversely to yields. The recent surge in bond yields has “knocked gold down to very attractive levels for the big consumer markets of Asia and the Middle East, with Shanghai premiums back above $10 per ounce,” said Ash. “That suggests that China has worked through 2020’s glut of supply.”
The market is also seeing “strong interest from private investors in the West,” he said, with daily demand on BullionVault around twice the 2020 level over the last 7 days.
Gold for April delivery on Comex was up $8.40, or 0.5%, at $1,737.20 an ounce. Prices on Friday settled at $1,728.80, the lowest most-active contract finish since June 2020.
Monday’s move comes after gold, based on the most-active contract, saw a weekly decline of about 2.7% and a loss of 6.6% for the month, which was its largest monthly fall since November of 2016.
The 10-year benchmark Treasury note touched a yield around 1.55% last Friday but was around 1.43% on Monday.
The Federal Reserve has suggested the climb in yields reflects upbeat expectations for an economic recovery fueled by the vaccine program and the likelihood of additional fiscal stimulus.
Meanwhile, the dollar, as gauged by the ICE U.S. Dollar index was up 0.2%.
A firmer dollar, which most commodities are priced in, and rising yields can make gold less appealing to buyers comparing the haven asset against yield-bearing investments that are perceived as safe. Gold doesn’t offer a coupon.
Some analysts cautioned that any rebound for gold would be perhaps fleeting, against the backdrop of a rally in the equity market, gains in the U.S. dollar and the approval of Johnson & Johnson’s one-shot vaccine, which appeared to be buttressing risk-taking on Wall Street.
“Buying interest in the yellow metal will likely be squelched today by rallying U.S. stock indexes and a firmer U.S. dollar index,” wrote Jim Wyckoff, senior analyst at Kitco.com, in a daily note.
The Centers for Disease Control and Prevention over the weekend approved the use of J&J’s COVID vaccine after the Food and Drug Administration also green lighted the virus remedy.
Meanwhile, the House passed the Biden administration’s $1.9 trillion COVID-19 relief package.
Separately, May silver rose 54.5 cents, or 2.1%, to trade around $26.985 an ounce, after prices on Friday marked a 3% weekly loss, and 1.8% monthly decline.
May copper tacked on nearly 1% to $4.1315 a pound.
April platinum traded at $1,215.20 an ounce, up 2.5%, while June palladium rose 2.8% to $2,378 an ounce.