Investing.com – Gold struggled to stay above mid-$1,700 territory Thursday, joining the plunge in most commodities and stocks on Wall Street after U.S. bond yields ran riot to the upside, triggering a so-called value-assets rally on bets the Covid-struck economy may do better than the Fed says.
Gold for April delivery on New York’s Comex settled down $22.50, or 1.3%, at $1,775.40 per ounce. It earlier tumbled to $1,764.25, nearing the June low of 1,759 hit last week.
Spot gold, which reflects real-time trades in bullion and which hedge funds and other money managers count on for direction more than futures, was down $33.19, or 1.9%, to $1,771.61 by 3:40 PM ET (20:40 GMT).
“The faster the global bond yields rise, the sharper the fall is for gold,” said Ed Moya, senior markets strategist at New York’s OANDA. “The precious metal is having a rough 2021 and the only thing that can right the ship is if central banks thwart the trajectory of bond yields. The Fed will have plenty of opportunities to stem surging Treasury yields, but for now it seems they can be a little more patient.”
Wall Street’s Dow slumped more than 1% while the tech-laden Nasdaq lost even more, 3%, as the yield on the U.S. 10-year Treasury note surged above the 1.5% level not seen since February 2020, before the outbreak of the coronavirus pandemic.
Yields spiked after an unexpected slump in U.S. jobless claims to November lows triggered fears of faster inflation, spooking investors into reining in bullish bets on stocks. Nasdaq was the favorite target of sellers as it had run way ahead of the Dow and S&P 500, which looked more valuable compared to the grossly-inflated price-earnings ratios of stocks on the tech index, which included the likes of Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Google (NASDAQ:GOOGL).
While the selloff linked to inflation fears on Wall Street was understandable, gold’s casualty to the same was almost laughable, considering its long standing as an inflation hedge and insurance against both economic and political troubles.
Even more bizarre was the relative weakness in the Dollar Index, as gold went down. The dollar is an outright alternative to gold and typically moves in the opposite direction to the yellow metal. The Dollar Index, which pits the greenback against a basket of six currencies, fell a notch to 90.13.
But Bitcoin — the other suspect of late in gold’s weakness — lived up to its billing, rising 0.8% to recover from its own selloff earlier in the week. Bitcoin recently reached record highs above $58,000 as even the institutional crowd once loyal to gold have teed behind the granddaddy of cryptocurrencies, which the U.S. Treasury has a very poor opinion of.
Gold has suffered a series of setbacks since its futures hit record highs of nearly $2,090 an ounce in August. The decline has accelerated from November, after vaccine breakthroughs for the Covid-19 often raised unrealistic expectations for economic recovery from the pandemic.
The Dollar Index and even bitcoin gained at the expense of gold during most of these three months, assisted by the spike in the 10-year note. Bond yields have spiked numerous times in the last four months as investors bet that inflation and economic growth will surprise in the second half despite the Fed persistently downplaying expectations on both.