Gold, Silver Retreat As Dollar Gains Upper Hand

Gold and silver slipped on Thursday, as the dollar and U.S. Treasury yields gained and markets awaited clarity on U.S. fiscal stimulus measures and the Bank of England’s (BOE) policy outlook.

Spot gold dropped 1.2% to $1,812.50 per ounce by 1039 GMT, after earlier touching a two-month low. U.S. gold futures fell 1.3% to $1,811.90.

Silver dropped 1.5% from the previous close to $26.46. Prices declined more than 12% since scaling a near eight-year peak of $30.03 on Monday, as a GameStop-style retail frenzy fizzled out.

“Silver is back to normal as this flight into silver by some retail investors has been an excessive move to the upside, which is now corrected to normal fundamental supported levels,” said Quantitative Commodity Research analyst Peter Fertig.

U.S. yields and a firmer dollar also pressured precious metals.

Making bullion more expensive for those holding other currencies, the dollar scaled a two-month peak, while U.S. 10-year Treasury yields were at a more than three-week high.

Gold is considered a hedge against inflation from large stimulus measures, but higher yields challenge that status as they increase the opportunity cost of holding non-yielding bullion.

“If the BoE gives any hint that they (are) considering tapering, that would be negative for gold,” Fertig said. [USD/] [US/]

The BoE decision is due at 1200 GMT.

“Growing expectations about a relatively quick end to the pandemic are raising hopes on the economic recovery and with it the likelihood of central banks reducing the current hyper-dovish monetary stimulus,” said ActivTrades chief analyst Carlo Alberto De Casa in a note.

Investors also focused on a $1.9 trillion U.S. coronavirus aid plan passed by the U.S. House without Republican support.

“The biggest risk to gold is stronger recovery as vaccines roll out, to the extent that we see U.S. bond yields rally,” said Lachlan Shaw, National Australia Bank’s head of commodity research.

But “if the rollout faces uncertainty, with these new emerging strains, then prices can still remain supported.”

Platinum fell 1.8% to $1,081.68 an ounce and palladium lost 1.3% to $2,245.66.

Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor

Read all the Latest News, Breaking News and Coronavirus News here