Gold prices slipped again on Thursday to book a third day in the red, as rising Treasury yields and a stronger U.S. dollar following Fitch Ratings’ downgrade of the U.S. credit rating put pressure on precious metals.
Price action
-
Gold prices for December
GC00,
+0.11%GCZ23,
+0.11%
delivery fell by $6.20, or 0.3%, to settle at $1,968.80 per ounce on Comex. -
Silver prices for September
SI00,
+0.04%SIU23,
+0.04%
delivery lost 18 cents, or 0.7%, to end at $23.70 per ounce. -
Palladium futures for September
PA00,
-0.80%PAU23,
-0.80%
rose $15.60 or 1.3%, ending at $1,257.40 per ounce, while platinum for October
PL00,
+0.05%PLV23,
+0.05%
was off $8.60, or 0.9%, to end at $921.80 per ounce. -
Copper futures
HG00,
-0.53%HGU23,
-0.53%
gained 6 cents, or 1.5%, to settle at $3.90 per pound.
Market drivers
Gold prices have seen their shine dim slightly this week. While the yellow metal is still trading well above its late-June lows of around $1,910 per ounce, a stronger U.S. dollar and rising Treasury yields threatened to push it even lower.
Fitch Ratings’ decision to downgrade the U.S. credit rating from AAA to AA+ and the Treasury Department’s plans to issue $1 trillion in debt during the third quarter stoked anxieties that pushed bond yields higher on Thursday.
See: How Fitch downgrade might impact Treasury’s $1 trillion third-quarter borrowing plans
U.S. yields rose again on Thursday, pushing the 10- and 30-year rates further into their highest levels since November, 2022, according to FactSet data. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
was up 11 basis points, to 4.185% from 4.077% on Wednesday afternoon, while the yield on the 30-year Treasury bond
BX:TMUBMUSD30Y
rose 15 basis points to 4.308%.
Pershing Square Capital Management founder Bill Ackman added more pressure on the long end of the yield curve by declaring that he’s short 30-year Treasury bonds.
“The Fitch downgrade has breathed new life into the dollar rally. As a first step, investors are getting rid of the weakest assets in their portfolios by buying more liquid Treasuries and the dollar,” said Alex Kuptsikevich, senior market analyst at FxPro.
In 2011, the S&P downgrade of the U.S. triggered a multi-year rally in the dollar as other countries fared even worse, not to mention riskier corporate bonds —something similar could happen this time around, Kuptsikevich said.
However, the long road must begin with “the first step,” as the greenback has been in a downward channel since November, so in order to confirm a reversal, it would need to climb above the previous local peak at 104.2, he said in emailed commentary on Thursday.
The ICE U.S. dollar index
DXY
shed less than 0.1%, to 102.50 on Thursday afternoon.
Rising Treasury yields and a stronger U.S. dollar tend to weigh on gold, since higher yields allow investors to reap higher returns elsewhere, and a stronger dollar makes gold more expensive for buyers in other currencies.
See: Fitch’s historic U.S. downgrade explained in one chart
In U.S. economic data on Thursday, the number of Americans who applied for unemployment benefits last week rose slightly to 227,000 from a five-month low, offering more evidence that layoffs are low and the labor market remains robust.
Nonfarm productivity, which measures hourly output per worker, increased at a 3.7% annualized rate in the second quarter, recovering from a revised 1.3% decline in the first three months of the year, according to a Labor Department report.
See: July jobs forecast: 200,000. Still too hot for the Fed, but the devil is in the details.
Traders awaited Friday’s government’s jobs report for July, which is expected to show the U.S. economy added 200,000 jobs last month, down from 209,000 in June, economists polled by the Wall Street Journal estimate.
Meanwhile, the percentage of jobless Americans is forecast to hold steady at 3.6% in July and leave it near a half-century low.
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