Silver tumbles to 2-year low as precious metals sell off again

Price action

• December gold futures
  GCZ22,
  -1.05%

  GC00,
  -1.05%
  retreated $18.70, or 1.1%, to $1,707.50 per ounce on Comex, with prices for the most-active contract poised for their lowest finish since July, FactSet data show.

• Silver futures
  SIZ22,
  -1.21%

  SI00,
  -1.21%
  for December delivery were off 31.2 cents, or 1.7%, to $17.57 per ounce, trading at their lowest since June 2020.

• Palladium for December
  PAZ22,
  -4.04%
  delivery declined $68.90, or 3.3%, to $2,010 per ounce, while platinum
  PLV22,
  -2.50%
  slumped $23.20, or 2.8%, to $803.80 per ounce.

• Copper
  HGZ22,
  -2.88%
  for December delivery was off 8.55 cents, or 2.4%, to $3.433 per pound, its lowest level in roughly 18 months.

What analysts say

While gold is typically seen as an inflation hedge, higher interest rates have hurt the yellow metal by making Treasury bonds and the U.S. dollar more attractive by comparison.

“Gold is struggling as inflationary pressures will keep all the major central banks with an aggressive inflation tightening stance. Rising global bond yields is kryptonite for gold and that trend might last a little while longer,” said Edward Moya, a senior market analyst at OANDA.

The ICE U.S. Dollar Index
DXY,
+0.79%,
a gauge of the dollar’s strength against a basket of rival currencies, is up 0.9%, while the yield on the 10-year Treasury
TMUBMUSD10Y,
3.263%
rose 14 basis points to 3.273%.

“Market derived inflation rates have started to drift lower as real yields correct higher,” analysts at ICICI Bank wrote in a market update Thursday. “That is, in turn, also working to weigh on gold prices.”

The ICICI Bank analysts said that they maintain their bearish view on gold prices as U.S. real yields continue to drift higher. They see gold prices trading between $1,680 and $1,750 in the near-term, with prices moving further lower to the $1,600 level by December 2022.

Metals prices continued lower in the wake of Thursday’s U.S. economic data.

New jobless claims declined by 5,000 in the seven days ended Aug. 27 to 232,000, a nine-week low, while U.S. labor productivity fell a revised, less than expected, 4.1% in the second quarter. Meanwhile, a key barometer of American factories held steady at 52.8% in August.