Gold, Silver Tumble With Higher Yields Dimming Metals’ Appeal
A stack of one kilogram gold bullion bars sit inside a vault in Germany. (Photographer: Michaela Handrek-Rehle/Bloomberg)

Gold, Silver Tumble With Higher Yields Dimming Metals’ Appeal

Gold wiped out gains for the week and silver tumbled the most since September as U.S. Treasury yields extended a rally and the dollar recovered.

Silver lost as much as 9.8%, while gold fell as much as 4.5%, the most since November. The dollar erased losses amid higher 10-year Treasury yields, which are raising the prospect of a pause in the currency’s recent slide. Higher rates diminish the appeal of bullion, which doesn’t offer interest.

Gold, which posted its biggest annual gain in a decade in 2020, has swung sharply since the start of the new year as traders weigh rising yields against expectations for additional economic stimulus that could bolster the metal. The commodity’s initial drop Friday was exacerbated after prices breached the 100-day moving average, a key technical level.

Gold and silver “seem to be under pressure on account of a stronger general dollar index, in turn pulled higher by a noticeable uptick in U.S. interest rates,” ED&F Man Capital Markets analyst Ed Meir said in a note.

Gold, Silver Tumble With Higher Yields Dimming Metals’ Appeal

Treasuries extended the week’s selloff on Friday, with 7-to-10 year sector leading the way with yield increases of close to 4 basis points. The 10-year yield touched a peak above 1.12% in New York trading, with rates supported by President-elect Joe Biden’s call for trillions of dollars in immediate further economic support.

  • Spot gold dropped 3.4% to settle at $1,849.01 an ounce at 5 p.m. in New York. The metal posted its first weekly decline in six weeks.
  • Silver slid 6.3% to $25.4234 an ounce after falling as much as 9.8%, the most since Sept. 21. Platinum and palladium also fell.
  • The Bloomberg Dollar Spot Index gained 0.1%.

A U.S. government report Friday showed that money managers increased their net-long position in gold futures and options to a 16-week high in the week ended Jan. 5. They also increased net-bullish bets on silver for the fifth week in six.

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