Apr gold (GCJ21) on Thursday closed down -22.50 (-1.25%), and March silver (SIH21) closed down -0.222 (-0.80%).
Gold and silver prices on Thursday posted moderate losses. Surging global government bond yields on Thursday fueled long liquidation in precious metals. Also, mostly weaker-than-expected U.S. economic data on Thursday was negative for industrial metals demand and weighed on silver prices.
Soaring global government bond yields are bearish for gold, which may prompt investors to move out of non-interest-paying gold and into government bonds. The 10-year T-note yield surged to a 1-year high Thursday of 1.609%. Also, the 10-year UK gilt yield rose to an 11-month high Wednesday of 0.829%, and the 10-year German bund yield climbed to an 11-month high of -0.216%. Finally, the Japan 10-year JGB bond yield rose to a 2-1/4 year high Thursday of 0.154%.
Fed comments on Thursday signaled the central bank is not concerned with rising bond yields, which was bearish for precious metals prices. Kansas City Fed President George said, "the notable rise in longer-term interest rates does not warrant a monetary response." Also, St. Louis Fed President Bostic said the recent rise in yields is "probably a good sign" as it reflects a better U.S. economic growth outlook.
Thursday's U.S. economic data was mostly supportive for gold but negative for industrial metals demand and silver prices. U.S. Q4 GDP was revised upward to 4.1% (q/q annualized) from 4.0%, weaker than expectations of 4.2% (q/q annualized). Also, Jan durable good orders nondefense ex-aircraft rose +0.5% m/m weaker than expectations of +0.8% m/m. In addition, Jan pending home sales unexpectedly fell -2.8% m/m, weaker than expectations of no change and the biggest decline in 9 months. A bearish factor for gold, and a positive factor for industrial metals demand and silver prices, was the -111,000 decline in U.S. weekly initial unemployment claims to a 2-1/2 month low of 730,000, showing a stronger labor market than expectations of 825,000.
Gold and silver recovered from their worst levels Thursday after a slump in stocks boosted some safe-haven demand for precious metals.
Gold has underlying support from the Covid pandemic, which is dovish for central bank policies. However, the pandemic is negative for industrial metals demand and is bearish for silver prices. Globally, Covid infections have risen above 113.209 million, and deaths have exceeded 2.5119 million.
Safe-haven demand and dovish central bank expectations have sparked fund buying of precious metals in recent months. However, long liquidation has set in gold after long gold positions in ETFs fell to a 7-1/4 month low Wednesday, down from October's record high of 3,459.8 metric tons (data since 2002). Long silver positions in ETFs soared to a record high Feb 2 of 1.017 billion troy ounces (data from 1990), although long silver positions fell to a 3-1/2 week low Tuesday.
Precious Metals Close Moderately Lower On Soaring Global Government Bond Yields (barchart.com)
