Shocking reversal of Gold from commodity leader to a laggard

After the biggest annual gain in a decade, gold entered 2021 with high expectations. However, the precious metal has seen the worst start in 30 years. 

Bullion for immediate delivery kept declining on Friday. Meanwhile, futures touched a seven-month low. 

Spot gold fell 0.4% to $1,768.53 an ounce at 8:37 am in Singapore and is 3% lower this week.

Last year, gold surged on pandemic-induced safe-haven buying, low-interest rates, and stimulus spending. 

This year, the precious metal dropped more than 6%. It’s been the worst start of the year since 1991.

Surprising resilience in the dollar and U.S. Treasury yields rally has hurt gold. 

Peter Thomas, senior vice president at Zaner Group, stated that people are going from gold into industrial metals such as copper. 

Yields on 10-year Treasuries soared to the highest levels in about a year this week. According to Michael McCarthy, chief market strategist at CMC Markets, gold is taking notice of what bond markets have been saying for several weeks. For a non-yielding asset like the yellow metal, that’s awful news. 

McCarthy says that if it moves through $1,765, the downside potential is very, very large. Potentially, it would cause gold to move into a new, lower trading range. 

Jeffrey Gundlach, DoubleLine Capital L.P.’s veteran investor, said Bitcoin might be benefiting from stimulus rather than bullion.

Still, according to Goldman Sachs Group analysts, gold could mount a comeback. There are prospects for additional stimulus, and Federal Reserve interest rates are on hold. 

The pre-existing bullish stance of the silver market

Silver, platinum, and palladium prices all declined. On Thursday, the cost of an ounce of silver closed at $27,165 on the London Precious Metals Exchange. 

However, Analysts remain optimistic about the white metal. The silver price has increased by 3.88% in 2021, and during the year, the precious metal has seen a 54.14% gain.

According to analysts, the critical area to watch remains the range of $30-31 an ounce. A decisive break above those levels would point to an extensive rally ahead.

Base metals traded mixed

Due to dollar strength and surge in bond yields, commodities saw broad selling. As a result, base metals complex traded mixed. 

Copper prices traded off the nine years highs as supply deficit fears continued to boost buying. Copper inventories at LME are near 76,025 tonnes, their lowest since 2005. 

The premium for cash in copper over three-month is growing, showing tight supply in the spot market. Analysts expect base metals to trade sideways to down for the day.