COMMENTARY – Gold slides to 8-month low, risks further downside


By David Brough

Gold prices slid to an eight-month low pressured by rising U.S. Treasury yields and a firmer dollar, and could slip further in the days ahead, commentators say.

They spoke of an exit from commodities, including precious metals, and other risky assets into cash even though U.S. interest rates look set to remain low for some time, impacted by the devastation to economies caused by the coronavirus pandemic.

Gold was down over 6 percent in February 2021 and hit $1,716.85 per ounce on February 26, its lowest since June 2020.

The selloff in gold was accelerated by technical selling after the precious metal fell below the 200-day moving average, according to Kitco Metals global trading director Peter Hug.

Some commentators see risks that gold could fall further, under pressure from rising U.S. Treasury yields and a stronger dollar, and could soon test $1,700 or $1,660 per ounce.

“We would not be surprised to see the (gold) price come down and test $1,700,” Jeff Christian of U.S. consultancy CPM Group said in a video presentation on February 26.

The increase in U.S. Treasury yields, which are up over 50 basis points so far this year, means the opportunity cost of holding non-yielding bullion has risen.

In the longer term, gold prices will likely be buoyed by the impact of a huge U.S. stimulus package, which is expected to boost the appeal of the yellow metal as an inflationary hedge.

Disclaimer: Any opinions expressed in this column are solely those of the author and should not be considered as investment advice.

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