Is the gold rally over?
The precious metal that is viewed as a safe haven investment saw its biggest drop in seven years after bond yields spiked higher on Tuesday, bringing an abrupt halt to the rally that pushed gold prices to a record high above $2,000 U.S. an ounce.
Treasury bond yields climbed Tuesday, cutting into the negative real rates that had supported the metal. The 10-year Treasury yield jumped the most since June ahead of an expected flood of government and corporate debt issuance.
Exchange-traded fund investors also took a breather from gold, seeing back-to-back outflows for the first time since June. State Street Corp.’s SPDR Gold Shares (NYSE:GLD), the largest gold-backed ETF, saw its biggest outflow since March.
Demand for precious metals as a safe haven asset slipped after the U.S. President Donald Trump commented on potential tax cuts, strong Chinese economic data and falling hospitalizations in California and New York.
Also eroding support for gold was a COVID-19 vaccine that Russian President Vladimir Putin said was cleared for use. Spot gold fell 5.7% to $1,911.89 U.S. an ounce in New York, the biggest drop since April 2013. Earlier, the price broke below the $1,921 U.S. level that had
stood as the record for almost nine years.
Gold futures for December delivery slid 4.6% to settle at $1,946.30 U.S. on the Comex in New York, the largest decline for a most-active contract since mid-March. Spot silver prices dropped 15% to $24.7931 U.S., the biggest decline since October 2008.
