Concerns over inflation, which is traditionally a catalyst for gold, have had the reverse effect of late.
A positive economic outlook amid the continued global coronavirus vaccine rollout continued to weigh on gold for the final week of February.
A rally in US Treasury yields added more downward pressure to the yellow metal, which sunk to a six month low — it has now shed 9.4 percent year-to-date and 12 percent since last August.
The rest of the precious metals also fell lower this week, while base metals registered a broad increase.
Concerns over inflation, which is traditionally a catalyst for gold, have had the reverse effect of late, as Treasury yields reap the benefits of global governments starting the process of reopening.
“The overall picture looks dire, gold is now in danger of a material move lower, if yields rise again,” Jeffrey Halley, OANDA senior market analyst, told Reuters.
Rising interest rates are another factor contributing to gold’s recent drop. However, according to the World Gold Council (WGC), the inflationary tone could be a catalyst for higher prices down the road.
“While higher interest rates may continue to pose headwinds for gold in the short and medium term, inflation expectations are also likely to move higher,” reads a Friday (February 26) note from the WGC. “Historically, gold has performed well in high inflationary environments globally.”
An ounce of gold was priced at US$1,719.46 at 11:26 a.m. EST on Friday.
After nearing US$30 per ounce early in the week, the silver price was on the decline on Friday. By midday, the white metal had lost 6.6 percent from the previous session’s high.
Silver’s association with gold has weighed on the metal recently; a resurgence in industrial demand is forecast to benefit the dual metal as the year progresses.
At 11:50 a.m. EST on Friday, silver was moving for US$26.67.
Platinum spiked to a five year high earlier in February, but spent the final week of the month slipping. The higher threshold proved unsustainable as prices dropped from US$1,291 per ounce to US$1,169. The correction has been attributed to investors recalculating demand for the automotive metal.
Similarly, palladium rallied to a four week high when values reached US$2,344 per ounce on Thursday (February 25). The metal’s price dipped dramatically when markets opened on Friday, driving the metal to a two month low of US$2,186.
Platinum was selling for US$1,172 at 11:59 a.m. EST on Friday, while palladium was valued at US$2,180.
Copper soared to a 10 year high of US$9,614 per tonne this week and is now up 21 percent since the beginning of the year. The red metal is profiting from supply constraints and increasing demand.
However, some of that positivity was lost on Friday as Chilean mining major Codelco announced its production was higher than forecast in 2020. Copper was sitting at US$9,201 on Friday morning.
Zinc rebounded from the two month low it registered in early February, moving north of US$2,800 per tonne. Lead also spent the last week of the month edging higher, climbing from US$2,103 per tonne to US$2,158.50. The price positivity for both metals may be related to dramatic declines in output in 2020.
“World zinc mine production fell by 5.9 percent year on year to 12.14 million tonnes last year, while global lead mine output dropped by 5 percent year on year to 4.48 million tonnes,” according to data from the International Lead and Zinc Study Group.
Efforts to combat COVID-19 were cited as a contributing factor for the significant drop in production.
Zinc was priced at US$2,894.50 and lead was valued US$2,158.50 on the last trading day of the month.
Nickel started the week at a five year high, when its price surpassed US$19,000 per tonne. The move followed word that Russian nickel, copper and palladium miner Norislk Nickel (MCX:GMKN) has suspended production at two of its mines due to water inflows.
“Partial suspension of the Oktyabrsky mine was required as a preventive measure to ensure the safety of our employees,” said Sergey Dyachenko, COO and vice president. “Operations at the Taimyrsky mine have also been partially suspended, since there are connected underground workings between the two mines, and water has found its way into this mine’s horizon.”
Nickel ended the week at US$19,568.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.