Gold futures settled with a loss on Monday, halting a seven-session run of advances for the precious metal that has been buoyed by fears about post-COVID inflation pressures.
“It’s been quite a run for gold, which has soared as inflation indicators have continued to rise and become more widespread,” wrote Craig Erlam, senior market analyst at Oanda Corp., in a note.
edged down by $1.90, or 0.1%, to settle at $1,866.60 an ounce, following a weekly advance of nearly 2.9%, representing the best such gain since the period ended May 7. Gold’s seven-day streak had been the longest for a most-active contract since a nine-day rise that ended on July 29, 2020, according to Dow Jones Market Data.
A rise in the U.S. dollar in Monday dealings and strength in U.S. Treasury yields put pressure on prices for the yellow metal.
The dollar, as measured by the ICE U.S. Dollar Index
was up 0.3%, while the 10-year Treasury note yield
was at 1.614%, up from 1.583% on Friday afternoon. A stronger dollar can pressure demand for assets priced in the currency. Higher yields in government debt can dull interest in gold, which doesn’t offer a coupon.
“We have seen some tremendous gains for the yellow metal, and it seems like traders are now in the mood to continue to shave some profit off the table,” said Naeem Aslam, chief market analyst at AvaTrade.
“Another important factor to note here is that gold prices have taken a wild turn as many market players were expecting, on the back of the [Federal Reserve’s] monetary policy,” he said in a market update. “There is no doubt that the Fed’s monetary policy is less gold-friendly than a few months ago — the Fed has started the tapering process.”
In a “typical textbook trade, this would have meant that gold prices should have fallen off a cliff, but that is not what we have experienced so far,” said Aslam. Overall, “gold prices have been strong, and in the last week we have seen more strength.”
On top of those bullish factors for bullion, fears of out-of-control inflation, sparked by supply-chain bottlenecks and a demand surge, have helped to bolster appetite for the precious commodity. Gold is seen as a hedge against rising inflation.
“Gold has become popular despite higher yields and a stronger dollar, as inflation-adjusted yields remain at their lows. It’s also been seeing some love for its role as an inflation hedge, as we saw in the aftermath of the U.S. CPI data last week,” wrote Oanda’s Erlam.
Consumer-price data last week, showed that the pace of inflation over the past year marched to 6.2% in October from 5.4% in the prior month. That is more than triple the Federal Reserve’s 2% target and is the highest rate since November 1990.
Among other metals traded on Comex, December copper
lost 1.1% to trade at $4.40 a pound.