By Geoffrey Smith
Investing.com -- Gold prices fell on Tuesday as risk assets stabilized in the aftermath of Monday’s rout, while higher bond yields also helped to restore the relative attractiveness of other havens than bullion.
By 12 PM ET (1600 GMT), gold futures for delivery on the Comex exchange were down 1.2% at $1,656.60 a troy ounce. Spot gold was down 1.4% at $1,656.64.
U.S. Treasury yields were between six and nine basis points higher along the yield curve, with the 10-Year Treasury benchmark at 0.60%. The dollar index, which tends to move inversely to gold, rose 0.9% after Monday's steep selloff.
“Conviction levels have to be running low right now, especially after failing to breach $1,700 when it appeared all the correlations stars were aligned,” said Stephen Innes, Asia-Pacific market strategist with AxiTrader.
Current prices have already embedded high expectations that the Federal Reserve will cut U.S. interest rates to near zero by the middle of this year. Investing.com’s Fed Rate Monitor Tool suggests that investors see a 50-basis-point cut at the Fed’s March policy meeting as certain, with a 62% chance of another 25 basis points in April.
While potential demand from portfolio investors appears unlimited in a world of high risk aversion and negative inflation-adjusted returns on almost all U.S. and European government debt, the loss of physical buyers, notably in China, has removed an important prop to demand.
China’s central bank hasn’t added to its gold reserves since October, while a new report released by the World Gold Council on Tuesday showed a steep drop in demand both from Chinese bar and coin investors and from jewelers last year due to surging prices. Chinese bar and coin demand fell by nearly one-third to around 210 tons last year, its lowest since 2014.
Elsewhere, silver futures fell another 1.3% to $16.83 an ounce, while platinum futures rebounded 0.9% to $870.15.
Copper futures trod water having plunged to their lowest since 2016 on Monday. They edged up 0.3% to $2.52 a pound.