(Bloomberg) — Gold entered 2021 with lofty expectations on the back of a record high and its biggest annual gain in a decade. Instead, the precious metal is off to its worst start in 30 years.
Bullion for immediate delivery headed for a sixth straight loss on Thursday, the longest run since late 2018, while gold futures touched a seven-month low, deepening a slump and falling through a support level that analysts say could portend further losses.
The metal, which surged last year on pandemic-induced haven buying, low interest rates and stimulus spending, has declined more than 6% in 2021, the worst performance on the Bloomberg Commodity Index. It’s suddenly facing a host of unexpected stumbling blocks. Chief among those are the surprising resilience in the dollar and a rally in U.S. Treasury yields as economic indicators show recovery from the pandemic is well under way.
With “rates going higher and inflation expectations peaking out, we’re seeing a lot of profit-taking in gold and people are going from gold into industrial metals such as copper,” said Peter Thomas, senior vice president at Zaner Group in Chicago. “It’s a perfect storm.”
The 6.5% decline in spot gold in 2021 is the worst start to a year since 1991, according to data compiled by Bloomberg. A gain in 10-year Treasury yields is weighing on demand for non-interest-bearing bullion, with the metal extending losses after forming a so-called death-cross pattern earlier this week. Yields on 10-year Treasuries climbed to the highest levels in about a year this week.
“The curve steepening and real rates starting to creep higher again are the main culprits behind the gold weakness,” said Ryan McKay, an analyst at TD Securities. “There is also a bit of a technical aspect to it as well, and many are worried about the death cross forming.”
Jeffrey Gundlach, the veteran investor and chief executive officer of DoubleLine Capital LP, who has been neutral on gold for over six months, said in a Twitter post that Bitcoin may be benefiting from the waves of stimulus rather than bullion.
Gold could still mount a comeback. Goldman Sachs Group Inc. analysts led by Jeffrey Currie said in a Jan. 27 note that with prospects for additional stimulus and Federal Reserve interest rates on hold, the metal “remains a compelling investment for the medium- to long-term investor.” That’s even as near-term dollar strength could present a hurdle, the bank said.
Futures for April delivery on the Comex in New York fell as much as 0.4% to $1,766.60 an ounce on Thursday, the lowest since July 2. They recovered to settle 0.1% higher, while spot bullion was down 0.1%.
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