Gold settled lower Thursday, but comments from U.S. House Speaker Nancy Pelosi raised hopes for a deal on another round of coronavirus aid, prompting prices to hold ground above the key $1,900-an-ounce mark.
Analysts, however, attributed overall weakness in prices for the precious metal to strength in the U.S. dollar and a continued push higher in Treasury yields, which can dull the luster of gold and other commodities, which are non-yielding assets.
“Gold prices pared losses and recaptured the $1,900 level after U.S. House Speaker Nancy Pelosi stated that lawmakers are “‘just about there’ on a stimulus deal,” said Edward Moya, senior market analyst at Oanda.
The precious metal had been lower early in the session on strong U.S. economic data “that took away some urgency from Congress in needing to deliver stimulus,” he said. Uncertainty surrounding a potential stimulus deal had prompted some traders to take refuge in the dollar, making dollar-denominated gold more expensive for foreign buyers.
Gold for December delivery GOLD, -1.75% fell $24.90, or 1.3%, to settle at $1,904.60 an ounce on Comex after touching an intraday low of $1,894.20. Prices settled at $1,929.50 in the previous session, the highest most-active contract finish since Sept. 18, according to FactSet data.
December silver SIZ20, 0.06% lost 53 cents, or 2.1%, at $24.709 an ounce.
Both gold and sister metal silver “continue to trade in an inverse fashion with the daily movements of the U.S. dollar index,” which was higher in Thursday dealings on “a corrective bounce after hitting a six-week low Wednesday,” said Jim Wyckoff, senior analyst at Kitco.com, in a daily note.
Gold rose Wednesday as the ICE U.S. Dollar Index DXY, 0.09%, a gauge of the currency against a basket of six major rivals, fell 0.5%. The index was up 0.3% on Thursday, but is down 1.1% so far in October. A weaker dollar is seen as a positive for commodities priced in it, making them cheaper to users of other currencies.
However, while the gold market “may love a weaker U.S. dollar…it also is contending with a selloff in U.S. Treasurys and higher yields result in assets with no yield becoming relatively less attractive at the margin,” said Chris Weston, head of research at Pepperstone, in a note.
The yield on the 10-year Treasury note TMUBMUSD10Y, 0.851% was up over 3 basis points at 0.84%, continuing a rise from above 0.5% in August. Yields rise as Treasury prices fall.
Among other metals traded on Comex, December copper HGZ20, -0.05% fell by 1.4% to $3.1535 a pound, after settling Wednesday at the highest in over two years.