Gold Slumps on Rising Bond Yields

By Glenn Dyer | More Articles by Glenn Dyer

Gold prices took a big hit Tuesday in the wake of a sudden surge in US bond yields.

The yield on the key 10-year bond jumped to more than 1.77% in morning trading, and then eased over the rest of the day to be around 1.71% heading into Asian dealings on Wednesday.

Gold though slumped sharply, losing 1.8% as it pushed through the $US1,700 an ounce level to settle at $US1,683.90 – a loss of more than $US30 an ounce.

It did, however, hold steady in early Asian trading at around $UD1,685 an ounce.

The slide in gold and another in oil strangely didn’t have the usual impact on ASX futures which jumped 51 points overnight Tuesday, pointing to an upbeat day today which will also see gold and energy stocks weaker.

The surge in US bond yields were initially blamed and more than offset continuing worries about the big hedge fund meltdown and billions of dollars in losses for the likes of Credit Suisse and Nomura.

But ahead lies the much anticipated $US3 trillion infrastructure announcement of President Biden Wednesday, US time.

Normally that would be bullish for gold with all the talk of higher spending, higher debt and growing volatility that should offset fears of higher rates.

As well, negative for gold is Biden’s ambitious 90-90 vaccine plan, which sees 90% of U.S. adults as eligible for vaccines by April 19 and 90% of the population living within five miles of a vaccination site.

All this is leading analysts to become increasingly positive that the US economy will grow faster than previously thought this year and next.

And not making life easier has been the usual ‘tidying’ up of investment holdings ahead of the end of the quarter. There might be a rise in prices tonight, but that will only be trying to make a miserable quarter look less miserable.

Year-to-date, gold is down more than 11%. This will be the first quarterly decline since 2018 when the quarter ends Wednesday. Silver is off more than 9% as well.

Comex copper dipped under $US4 a pound for the first time since February 19 to end just above $US3.97. It is still up more than 13% for the year to date, but the gains at one stage were around 17%.

Copper is down more than 30 cents since its most recent peak of $US4.29 a pound on February 24.

For a metal supposedly an indicator of economic activity – especially in China – and facing growing demand for renewables such as electric vehicles and wind farms, the recent slide in the price of copper suggests all is not bright looking a little down the track.

That’s not the message rising bond yields are sending at the moment.

 

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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