Gold futures prices headed toward a third straight advance Thursday, with the metal’s haven status attracting buying as a sharp retreat for U.S. stocks spread to global markets.
Gold gained as global stock markets suffered from broad declines Thursday. Major U.S. stock indexes made attempts to move higher to after Wednesday’s plunge.
The dollar, a key driver for the precious metals, weakened against its currency rivals. Another haven market, however, U.S. Treasury bonds — chief among culprits influencing rickety stock trading of late — drew their own fresh demand Thursday, halting for now the rise in yields that spooked stock investors. Bond prices and yields move inversely.
December gold jumped $17.60, or 1.5%, to $1,211 an ounce, on track for the strongest finish in three weeks. December silver rose 17.9 cents, or nearly 1.3%, to $14.505 an ounce.
“hardly responded to recent stock market selloff, as investors found better yields in the fixed-income markets. But now that the dollar and yields have eased back, gold is finding some solid support, especially given that the stock markets are selling off,” said Fawad Razaqzada, market analyst with Forex.com.
“The metal could extend its gains further should it finally crack that $1,205–$1,215 resistance range,” he said.
Because precious metals — often used as a haven by investors — don’t offer a yield, the commodity is vulnerable to a slump in a rising-rate environment. That climate also tends to lift the dollar, dimming the appeal of U.S.-priced gold to investors using other currencies. But stock markets are also vulnerable to rising bond yields and gold’s fortunes have been tethered to record-setting equities for much of this year.
“While it took a massive washout in equities and a moderate amount of economic anxiety, the safe haven lift in gold is justified given that the Dow Jones Industrial Average into the low this morning has posted a 24 hour decline of 1,300 points,” analysts at Zaner Precious Metals wrote in a daily note Thursday.
“At least for the time being, the gold market has tossed aside the fear of slackening physical demand and in a somewhat perverse way has embraced the hope for improved investment demand,” they said. Still,
“we get the feeling that the bull camp will need a very high level of ongoing anxiety from declines in equity prices to facilitate a consistent flow of speculative buying into gold.”
On Thursday, the ICE U.S. dollar index was down 0.3% at 95.21, though it remains more than 3% higher this year so far, contributing to a nearly 8% drop for gold over the same stretch. The yield on the U.S. 10-year Treasury note fell nearly 4 basis points to 3.184%.
Rising rates, reflected both in Federal Reserve policy and the bond market’s reflection of that policy, have been the major catalyst across financial markets. The Fed has already increased rates three times in 2018 and is expected to lift benchmark rates a fourth time in December, as well as continue its gradual tightening trend in 2019, according to the Fed’s own forecasts. Fed action drew fresh criticism from a campaigning President Donald Trump Wednesday night.