Gold’s New Year Rally Loses Momentum as Equities, Yields Advance

(Bloomberg) -- Gold was set to snap its longest rally since July as gains in equities and U.S. Treasury yields reduced demand for the non-interest-bearing metal.

The S&P 500 climbed toward a record after Democrats looked poised to take control of Congress, potentially unleashing a torrent of federal spending to revive growth. U.S. Treasury yields broke above 1% for the first time since the pandemic-driven turmoil in March.

The rise in yields “is an awakening moment,” Phil Streible, chief market strategist at Blue Line Futures in Chicago, said by phone. “People will start liquidating gold looking for other opportunities out there.”

Bullion had advanced this week amid lower U.S. real yields and a weaker dollar, but failed to breach an early November high, a key technical level. Investors may have decided to take profits in the thin market after the dollar strengthened, according to Georgette Boele, an analyst at ABN Amro Bank NV.

“Looks like the recovery ran out of steam close to previous high,” said Boele, adding that $1,963 an ounce was the crucial level.

The Democrats have already captured one of the two Georgia seats as Raphael Warnock defeated Republican Senator Kelly Loeffler. Democrat Jon Ossoff has also claimed victory over his Republican counterpart, though that race remains too close to call.

Spot gold declined 2.2% to $1,907.93 an ounce at 1:49 p.m. in New York. The metal had risen for six straight sessions through Tuesday, the longest rally since July 29. Futures for February delivery settled 2.3% lower. Silver, platinum and palladium also fell.

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