Gold futures on Tuesday were on track for the sharpest daily fall in about a month as the U.S. dollar strengthened and Treasury yields climbed, weighing on appetite for precious metals.
The weakness in gold is likely a "classic 'give back' of an overdone reaction to the [Federal Reserve's] likely hold stance following a serious 'miss' on the August U.S. payroll report," analysts at Zaner wrote in Tuesday's markets commentary.
U.S. data released Friday showed a lower-than-expected increase in new U.S. jobs in August, prompting prices for the precious metal to notch a gain for the week and mark their highest finish since mid-June.
On Tuesday, December gold declined by $22.40, or 1.2%, to trade at $1,811.40 an ounce, putting the precious metal on track for the sharpest one-day slide for a most-active contract since Aug. 9, FactSet data show. The decline follows a 0.8% rise for bullion last week, with prices settling Friday at their highest since June 16.
Traders expect a dollar rebound this week said analysts at Zaner. Investment interest in the gold exchange-traded fund remains "very poor," with total ETF gold holdings at the end of last week 6.8% lower on the year, U.S. Treasury yields jumped Tuesday, and Chinese official gold holdings declined by 0.6% last month versus July, they said.
The dollar, as gauged by the ICE U.S. Dollar Index , was trading at 92.39, up 0.4% in Tuesday dealings. A stronger dollar can make assets priced in the currency, such as gold, less attractive to investors using other currencies.
Meanwhile, benchmark bond yields, which can compete for haven flows against gold, were rising, increasing its appeal when pitted against bullion. The 10-year Treasury note was yielding 1.368%, versus 1.322% last Friday. Treasury markets were closed on Monday in observance of U.S. Labor Day.
Trading for gold has come against the backdrop of concerns about the delta variant of the COVID-19, which have supported its price moves and uncertainty about the Federal Reserve's monetary-policy plans, as the labor-market recovery looks uneven. The fact that easy-money policies have remained in place has helped equity markets rise repeatedly to record highs, undercutting demand for bullion, some strategist argue.
"Gold is finding new interest, but the precious metal is caught between a very confused economic outlook and the relentless new record highs in equities," wrote Adrian Ash, director of research at BullionVault, in a research report.
Gold bulls argued that Tuesday's slide represented investors taking profit after last week's solid rally.
Alex Kuptsikevich, senior financial analyst at FxPro, said that gold supporters should be heartened by its ability to hold above the psychologically significant level at $1,800.
The analyst said that gold imports remain strong and speculated that demand would pick up for bullion during periods of seasonal strength for prices, including Christmas.
"It is also worth noting that in August, the volume of gold imports reached the highest levels in the last five months...The favorable conditions for this were created by high market demand and attractive prices, which also prompted jewelers to increase purchases in advance in anticipation of the upcoming Christmas season," said Kuptsikevich, in a note.
Meanwhile, silver for December delivery was trading 23.7 cents, or 1%, lower at $24.57 an ounce.
December copper also fell by 0.9% to $4.30 a pound. October platinum shed 0.7% to $1,1014.10 an ounce and December palladium traded at $2,374.50 an ounce, down 1.7%.