Gold futures for August expiration touched a low of $1,209.6 an ounce and ended the day at $1,212.1 on Monday, July 10. Gold rebounded from its Friday lows as the dollar stood almost flat. Silver and palladium also rebounded. These two metals rose 1.3% and 0.72%, respectively. Platinum was the only precious metal that fell on Monday, July 10. It dropped 0.2%.
The sentiment in the precious metals market is increasingly negative as the US ten-year bond yields have risen sharply since late June and are now near two-month highs. An increase in Treasury yields is often negative for precious metals, as they don’t bear any intermediary cash flows.
Rate of interest rises and gold falls
The above chart gives us a comparative price performance of gold (IAU) along with the US two-year and ten-year rate of interest (SHY) (IEF). The higher the government raises interest rates, the more appealing investors will find Treasuries compared to gold as haven assets.
As precious metals hit lows on Friday, July 7, gold holdings in the world’s largest bullion-backed ETF, the SPDR Gold Trust (GLD), fell 2% for the week.
The drop in the metals has also been detrimental for the price of most mining shares. Primero Mining (PPP), Coeur Mining (CDE), Yamana Gold (AUY), and Barrick Gold (ABX) fell 7.4%, 6.3%, 4.1%, and 0.57%, respectively, on a five-day trailing basis. Combined, these four miners make up about 12.1% of the VanEck Vectors Gold Miners Fund (GDX).