Gold prices slide as investors look to the dollar and Treasury yields

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February 5, 2019 12:59pm NYSE:GLD

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From Myra P. Saefong & William Watts: Gold futures struggled for direction on Tuesday after posting losses in the past two trading sessions, with investors looking to the dollar and Treasury yields for directional cues.


Gold for April delivery GCJ9, -0.07%  on Comex fell 40 cents, or less than 0.05%, to $1,318.90 an ounce — trading between a low of $1,314.80 and high of $1,321. March silver SIH9, -0.32%  declined 3.6 cents, or 0.2%, to $15.85 an ounce.

“Residual strength in the dollar gives off the impression of a near term dollar uptrend and that could keep the bias in both gold and silver pointing downward,” analysts at Zaner Precious Metals wrote in a note Tuesday. “Clearly, the gold and silver markets damaged their charts Monday by extending a recent pattern of lower lows and lower highs.”

Still, “while some traders think that Chinese gold demand will fall off this week due to the [Lunar New Year] holiday, it is possible that active holiday purchases will eventually boost gold demand readings,” they said.

On Monday, gold was unable to overcome a headwind from a stronger U.S. dollar. Gold can often take cues from moves in the dollar, with a stronger currency making commodities priced in the unit more expensive to users of other currencies. The ICE U.S. Dollar Index DXY, +0.24% a measure of the greenback against a basket of six major rivals, was up 0.2% Tuesday.

Higher bond yields TMUBMUSD10Y, -0.93%  can also pressure gold and other commodities that offer no yield but in Tuesday dealings, the 10-year Treasury note yield TMUBMUSD10Y, -0.93%  was down 2.3 basis points at 2.700%.

Meanwhile, data released Tuesday revealed that U.S. service-oriented businesses grew in January at the slowest pace in six months, according to the Institute for Supply Management.

Market bulls said they remain upbeat on prospects for gold, which has rallied 2.9% so far in 2019.

Peter Hug, director of global trading for Kitco.com, said in a Tuesday post that near-term consolidation would be healthy for the market, with China’s Lunar New Year holiday set to decrease demand this week.

“Unless there is a surge for the dollar, we see a $1,305 – $1,325 range this week,” he said, with technical resistance at $1,325 the next target for bulls to overcome. A move through that level could open the way for a test of $1,337.

In other metals trade, March palladium PAH9, +0.88%  was up $5.90, or 0.4%, at $1,336.30 an ounce, while April platinum PLJ9, -0.11%  added $1.40, or 0.6%, at $824.20 an ounce. March copper HGH9, +0.91%  was up 2.2 cents, or 0.8%, at $2.816 a pound.

Among exchange-traded funds, the gold-backed SPDR Gold Shares GLD, +0.20% rose 0.3%.


The SPDR Gold Shares (GLD) was trading at $124.23 per share on Tuesday afternoon, up $0.27 (+0.22%). Year-to-date, GLD has gained 0.47%, versus a 2.50% rise in the benchmark S&P 500 index during the same period.

GLD currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #1 of 35 ETFs in the Precious Metals ETFs category.


This article is brought to you courtesy of MarketWatch.


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