Gold and silver prices increased on Wednesday as the US Treasury Bond Yields dropped after stalling retail sales growth in December, according to reports from Investing.com. This stalling growth indicates a softening economy ahead of key job data and decreases the opportunity cost of holding non-yielding assets like gold.
Moreover, the falling yields also spur macroeconomic shifts like expectations of looser policy or slower growth that support the precious metals.
Spot gold was estimated at $5,057.23 per ounce, 0.7% higher. US gold futures for April delivery also increased to $5,081.40 per ounce, an increase of 1%. Spot Silver was found at $82.56 per ounce, a rise of 2.3% after dropping more than 3% in the previous session.
Spot Platinum increased to $2,131.60 per ounce, a rise of 2.1%, while Palladium was estimated at $1,741.78 with an increase of 2%
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According to Kyle Rodda, a senior analyst, during the past few weeks, precious metals have moved away from their frequent market fundamentals and stopped reacting closely to interest rate changes. Therefore, the current lower bond yields are supporting gold prices.
The US yields dropped on Tuesday after receiving data suggesting that the economy may be softening, indicating the possibility of cutting the interest rates by the Federal Reserve.
The slower economy is attributed to the unchanged retail sales in December as households continued to spend hefty amounts on motor vehicles and other high-ticket items, thus setting consumer spending and the economy on a slower growth trajectory.
Rodda further added that after decreasing retail sales numbers, it is expected that perhaps the deeper rate cuts are required more imminently than was thought before.
However, Federal Reserve Bank of Cleveland President Beth Hammack stated on Tuesday that the US central bank is not facing any urgency to cut the interest rate this year amid the cautiously optimistic outlook for economic activity.
Investors are anticipating the cuts of at least 25-base-point rate in 2026, and the first one is expected in June. The non-yielding assets, like precious metals, do quite well in markets characterized by low-interest rates.
Further information on the Fed’s monetary policy will be provided after the release of the non-farm payrolls reports for January, due later today, and inflation data on Friday.
