Metals Stocks: Gold ends sharply lower, but posts gains for the month and quarter

Gold futures head lower Tuesday morning, putting the precious metal on track for a second drop in a row as government bond yields and the US. dollar rose, pressuring precious metals that have mostly gained in the month and quarter against the backdrop of the COVID-19 pandemic.

June gold GCM20, -1.30% on Comex was off $21.50, or 1.3%, at $1,621.87 an ounce, after falling 0.7% on Monday. For the month, gold has advanced 3.5% thus far, and is on pace for a return for the first quarter, which ends on Tuesday, of 6.5%, according to FactSet data.

Trading for precious metals has been marked by concerns about the rapidly moving infection, COVID-19, which was first identified in Wuhan, China in December, but has infected more than 800,000 people and claimed nearly 39,000 lives world-wide, as of Tuesday morning, according to data aggregated by Johns Hopkins University.

The pandemic has shutdown business activity in swaths of America and elsewhere throughout the globe, which has driven investors to the perceived safety of gold during the period. But uncertainty about the duration of the illness and the severity of its impact on global economies has made for bumpy trade in gold. Meanwhile, silver futures, which are also viewed as an industrial metal, has been weighed by the prospect of slowing economic expansion in the world.

On Tuesday, however, investors have taken some comfort in data out of China, which reflect modest signs of a rebound. China’s manufacturing gauge for the March official purchasing managers survey rose to 52, from a record low of 35.7 in the previous month as factories resumed work following monthslong shutdown.

Meanwhile, gold was under pressure from strength in the U.S. dollar, which most commodities are priced in. A measure of the dollar was gaining strength against a basket of a half-dozen currencies, the ICE U.S. Dollar Index DXY, +0.43% was up 0.6% on Tuesday. The currency index has been up 1.7% for the month and 3.5% for the quarter. A stronger dollar can make assets priced in the currency comparatively more expensive for buyers using other monetary units.

Rising bonds yields have drawn also some demand away from gold, which doesn’t offer a yield. The 10-year Treasury note yield TMUBMUSD10Y, -2.64% was at 0.697% from 0.667% Monday afternoon, according to Dow Jones Market Data.

“The precious metal should remain confined in a narrow range until there is a fresh directional catalyst,” wrote Lukman Otunuga, senior sesearch analyst at FXTM, in a Tuesday research note.

The analyst wrote that “should the dollar regain its footing on risk aversion and global recession fears, this may hinder gold’s upside potential.”

May silver SIK20, +1.05%, meanwhile, added 7 cents, or 0.4%, on the session at $14.20 an ounce, after declining 2.8% on the prior day. Thus far in March, gold’s sister metal has lost 13.7%, with a quarterly decline of nearly 21% in sight.