Share

Gold dips on rise in bond yields, silver plunges on volume spike

Singapore - Precious metals are getting beaten up by the bond rout.

Gold is set for a fourth weekly loss in five and silver sagged to the lowest level in 15 months on heavy trading as an increase in Treasury bond yields, coupled with concern further gains may be in store, pressures non-interest bearing assets.

Bullion for immediate delivery fell as much as 0.5% to $1 219.19 an ounce, and traded at $1 221.64 at 12:09, according to Bloomberg generic pricing. The metal has lost 1.6% this week, the most since early May.

Silver plunged as much as 3.9% to $15.4130 an ounce, the lowest since April 2016, after giving up all of this year’s gains.

Silver dump


More than 5 000 silver futures contracts were traded in a single minute on the Comex in New York at just after midnight London time - an hour later, volume was back below 100 contracts a minute. The spike in volumes called to mind a similar increase in gold trading last week.

After years of largesse, central banks are moving in sync to tighten policy, boosting yields, curbing liquidity, and hurting some assets including precious metals.

“Higher bond yields translate to a higher opportunity cost for holding gold,” John Sharma, an economist at National Australia Bank, said by email. “The sell-off in bonds led to a spike in government bond yields, as traders are pricing in an end to easy liquidity.”

Following two rate rises this year, Federal Reserve policy makers are scrutinising data to see whether further hikes are warranted, with US jobs data due on Friday. Minutes from the European Central Bank’s latest meeting showed officials leaving the door open to removing a pledge to buy bonds.

Pressure's on

“In order for central bankers to say things like this and eventually do something like that, it does mean that the global recovery is still on track and risk sentiment is still strong,” said Barnabas Gan, an economist at Oversea-Chinese Banking.

“Talking about precious metals in particular, gold being a safe haven, the improved growth sentiment, risk sentiment in the global markets is a very, very strong indicator for lower gold prices.”

The yield on 10-year Treasuries added 1 basis point to 2.38%, after climbing 4 basis points on Thursday and gaining in June for the first increase in five months. DoubleLine Capital CEO Jeffrey Gundlach, whose firm oversees $109bn says that 10-year yields are on course to move toward 3% this year.

The US jobs data remains central to the near-term outlook. ADP Research Institute data on Thursday showed companies adding fewer workers to payrolls in June than the prior month, setting up a potentially disappointing number from the official report. Weaker-than-expected jobs data and gold’s safe-haven status “should limit any fallout from rising yields,” NAB’s Sharma said.

In other precious metals:

Platinum for immediate delivery fell 0.6% to $905.44 an ounce. Palladium was up 0.2% at $837.29 an ounce.

Read Fin24's top stories trending on Twitter:


We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.2%
Rand - Pound
23.94
-0.2%
Rand - Euro
20.46
+0.1%
Rand - Aus dollar
12.35
-0.0%
Rand - Yen
0.13
-0.2%
Platinum
911.00
+1.6%
Palladium
1,008.15
+0.6%
Gold
2,222.33
+1.3%
Silver
24.87
+0.9%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.9%
Resource 10
57,251
+2.9%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders