By Barani Krishnan
Investing.com - Gold posted its worst monthly loss since 2016 as the yellow metal broke below key mid-$1,700 support on Friday, following most commodities and Wall Street’s Dow lower for a second straight day as investors revalued their portfolios.
Gold for April delivery on New York’s Comex settled down $46.60, or 2.6%, at $1,728.80 per ounce. It earlier tumbled to $1,715.05, its lowest since a June 8 bottom of $1,700.10.
For the week, the benchmark gold futures contract was down 2.7%, following through with the previous week’s slide of 2.5%. With Friday being the last trading session for February, it wrapped the month down 6.6%, its worst since a 7.2% decline in November 2016 .
Spot gold, which reflects real-time trades in bullion, was down $41.03, or 2.3%, to $1,729.81 by 1:50 PM ET (18:50 GMT. Hedge funds and other money managers sometimes rely more on the spot price than futures for determining direction in gold.
Whatever the case, analysts saw deeper losses for the yellow metal until it hit what some called a “hard floor”.
“I don't rule out on some pull back but I certainly don't see a big reversal to the $1,835 or $1,900 areas before it hits a hard floor, which can be either the imminent $1,691 level or $1,642,” said Sunil Kumar Dixit of SK Dixit Charting in Kolkata, India. “There will be value buying at those levels. Until then, it's a free fall.”
Gold has suffered a series of setbacks since its futures hit record highs of nearly $2,090 an ounce in August. The decline has accelerated from November, after vaccine breakthroughs for the Covid-19 often raised expectations for economic recovery from the pandemic.
This week’s tumble came after investors worldwide steered away from government bonds and into select assets on conviction that the Covid-19’s stranglehold on the world economy was eroding despite threat from new variants of the virus. The exit from bonds sent yields associated with those instruments surging, pressuring real interest rates to follow.
The 10-year Treasury note, the benchmark for U.S. bonds, surged Thursday to above 1.6%, a level not seen since February 2020, before the outbreak of the pandemic. That triggered a bloodbath on Wall Street, particularly hitting tech stocks index Nasdaq which had gained the most during the pandemic from investors channeling money into so-called stay-home stocks such as video-conferencing tool Zoom and exercise machine Peloton (NASDAQ:PTON).
The slump in stocks continued to an extent on Friday in the broader Dow index, even as Nasdaq put in a partial recovery and the S&P 500, the benchmark for top 500 U.S. stocks, swung in and out of red territory.
Gold, however, no enjoyed no such reprieve.
As the yield on the U.S. 10-year note retreated on Friday, the Dollar Index surged instead to a one-week high of 90.8. The dollar is an outright alternative to gold and typically pressures gold when it rallies.
The Dollar Index, even Bitcoin, have often gained at the expense of gold since early November, assisted by the spike in the 10-year Treasury note. Bond yields have surged numerous times in the last four months as investors bet that inflation and economic growth will surprise in the second half despite the Federal Reserve persistently downplaying expectations on both.
Bitcoin was down as well on Friday, losing 5%. But it also hit record highs above $58,000 recently as it attracted even institutional investors once loyal to gold -- despite the U.S. Treasury repeatedly expressing a poor opinion about the granddaddy of cryptocurrencies.