Metals Stocks: Gold ends lower as global stocks climb, but falling bond yields underpin the metal

Gold futures ended lower on Wednesday, pressured as global equities rallied, dulling their haven appeal.

U.S. government bond yields, however, remained mostly under pressure in the wake of an emergency interest rate cut a day earlier by the Federal Reserve, limiting losses for the precious metal.

Global equity markets tracked higher so it is “not surprising” to see gold trading back from its early high, analysts at Zaner Metals wrote in a daily note. “Certainly the sharp bounce in equities is a slight negative for gold…but keep in mind gold recently has been behaving like a physical commodity in need of assurance that physical demand won’t be cut sharply by the virus.”

Gold for April delivery GCJ20, -0.18% on Comex fell $1.40, or 0.09%, to settle at $1,643 an ounce after an intraday high of $1,654.30. Prices had climbed by 3.1% on Tuesday, posting the largest one-day percentage rise since June of last year. May silver SIK20, +0.36% track on 5.8 cents, or 0.3%, on Wednesday to $17.246 an ounce.

The latest move for gold comes as an estimate from ADP and Moody’s Analytics Wednesday showed that U.S. private-sector employment added 183,000 jobs in February, down slightly from 209,000 in the prior month. Separately, the ISM services index rose to 57.3% in February from 55.5%, though the survey showed businesses were more worried about coronavirus.

Gold saw sharp gains Tuesday as investors dumped equities and other assets perceived as risky for traditional havens, including Treasurys and precious metals, after the Federal Reserve delivered an emergency, intermeeting rate cut of 50 basis points in an effort to cushion the economy from any disruptions tied to the spread of COVID-19. Treasury prices soared, pushing down yields, with the rate on the 10-year note TMUBMUSD10Y, +0.47% dropping below 1% for the first time. It traded at 0.9876% in Wednesday dealings.

“The Fed has given gold bulls a shot in the arm, as rising expectations for more coordinated policy easing by global central banks offer fresh upside to bullion prices,” said Han Tan, market analyst at FXTM, in a note. “Even if the human toll from the coronavirus outbreak were to stabilize over the immediate term, investors still have to wait to find out what the eventual global economic cost is over the coming months. Gold is expected to remain supported amid such drawn-out uncertainties.”

The drop in Treasury and other global bond yields was seen as a boost for gold, reducing the opportunity cost of holding a nonyielding asset.

As gold futures settled, however, U.S. stocks were in rebound mode Wednesday, with benchmark stock indexes moving higher, after the previous session’s tumble. Some analysts attributed the gains for stock indexes to increased chances that former Vice President Joe Biden will become the Democratic Party’s presidential candidate in November’s election.

Among other metals, May copper HGK20, +0.31% added 0.5% to $2.586 a pound. April PLJ20, +0.84% climbed 0.7% to $875.20 an ounce, but June palladium PAM20, +2.66% settled at $2,385 an ounce, down 0.1%.