Gold dropped for a fifth straight day. It has put the haven on course of the longest losing run in almost a year.
The drop in precious metal prices resulted from Treasury yields increasing. Market sentiment is optimistic on expectations that the economy is recovering from the coronavirus impact.
The distribution of the coronavirus vaccine has progressed. Besides, the pace of infections slowed. It is boosting yields and weighing on the gold demand. The yellow metal has sunk more than 5% this year.
Bullion’s 50-day moving average retreated below its 200-day moving average. So, analysts expect the precious metal is likely to see further losses.
Edward Moya, a senior market analyst at Oanda Corp., stated that a runaway rally in global bond yields had delivered a fatal blow to gold. Yields are rising on reflation bets, and that is triggering an unwind of many safe-haven trades.
Spot gold dropped 0.4% to $1,786.88 an ounce and traded at $1,791.04 by 7:51 a.m. in Singapore. If Wednesday’s prices ended lower, that would be the worst run since last March.
Other metals have seen a decline too. Moya thinks that if global bond yields resume rallying, the dollar will keep rebounding. That could be a bearish factor for gold, and it could send the precious metal to the $1,750 level.
US Yields plummet from one-year high
On Wednesday, Treasury yields dropped from their highest levels. Meanwhile, European stocks edged lower.
The Stoxx 600 Index slid amid a mixed bag of corporate results.
S&P 500 futures traded flat. Meanwhile, the yield on benchmark 10-year Treasuries slipped to around 1.28% after touching the highest since February 2020.
Investors are wondering how high can bond yields climb before spoiling the risk rally. Simultaneously, some strategists call for a pause to positive sentiment readings for assets like Bitcoin, which caused speculative euphoria.
Tobias Levkovich, Citigroup Inc.’s chief US equity strategist, thinks that a 10% pullback in US shares is plausible.
Liz Ann Sonders, the chief investment strategist at Charles Schwab & Co., stated that the market is fairly bubbly from a sentiment perspective. You have to move higher in yields that go out of the comfort zone as a potential risk associated with that.
As for oil, the commodity fluctuated around $60 a barrel. China remains shut for a week because of the Chinese New Year holiday, and it will reopen Thursday.