Gold price drops to one-week lows as global bond yields tick up

November 14, 2017

London (Nov 14)  Gold prices hit roughly one-week lows Tuesday as global bond yields tipped higher, dulling demand for the yellow metal.

Still, uncertainty over the outlook for U.S. tax reforms and their potential impact in supercharging the economy kept gold’s losses in check, hitting investor risk appetite and underpinning gold’s value as a haven asset.

December gold GCZ7, -0.34% fell $6.50, or 0.5%, to $1,272.90 an ounce. The exchange-traded SPDR Gold Trust GLD, +0.15%  eased 0.4% in premarket trading.

The contract has settled into relatively narrow trading after bigger moves last week. Its 1% drop on Friday was the biggest single-session tumble in roughly two weeks. That move came a day after gold posted its highest finish since Oct. 16, according to FactSet data.

On Tuesday, “gold has suffered its second high-volume dump since Friday,” Ole Hansen, head of commodity strategy at Saxo Bank, said in a tweet. “A weaker Japanese yen and bonds [are] potential drivers.”

He pegged the next level of support at $1,265 for the December futures contract.

Gold bucked its typically inverse relationship with the dollar. The ICE U.S. Dollar Index DXY, -0.41% which measures the buck against six rivals, eased 0.3% to 94.26. The index fell sharply late last week, logging its biggest decline since Oct. 10 on Thursday, according to FactSet data. A weaker dollar boosts gold as the falling currency makes the dollar-priced bullion more attractive to investors using another currency.

The yield on the 10-year Treasury TMUBMUSD10Y, -0.52%  edged up to 2.391%, as prices, which move inversely to yield, declined. Treasury yields typically move inversely to gold, which doesn’t bear a yield.

 As for tax policy, Treasury Secretary Steven Mnuchin late Monday ruled out any increase in the corporate tax rate to above 20% in an interview at The Wall Street Journal CEO Council event. “It’s not going up,” Mnuchin said. “I can tell you this is one of the things the president feels very strongly about.”

Meanwhile, Fed chief Yellen, European Central Bank President Mario Draghi, Bank of Japan Governor Haruhiko Kuroda and Bank of England Governor Mark Carney are taking part in a moderated discussion on communication and markets, leaving financial markets awaiting any clues the foursome might offer on global interest rates. Their appearance is only part of a heavy line-up of Fedspeak this week.

On a relatively light data calendar, October producer prices will be released at 8:30 a.m. Eastern. Economists polled by MarketWatch are forecasting a 0.1% rise for the month. Check out:MarketWatch’s Economic Calendar

In other metals trading, silver for December delivery SIZ7, -0.60% slipped 11 cents, or 0.7%, to $16.935 an ounce. The exchange-traded iShares Silver Trust SLV, +0.88%  was down 0.6%.

Read: Silver’s bullish underpinning—it’s an essential metal for these 3 growth industries

Palladium continued to pull back from 16-year highs hit last week. The December contract PAZ7, -0.22%  fell $1.90, or 0.2%, to $987.80 an ounce. It settled last Wednesday at $1,015.85—the highest since February 2001. January platinum PLF8, -0.18% shed $3.40, or 0.4%, to $932.20 an ounce.


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