As Treasury Yields Rise, Bank Stress Eases, Gold Prices Retreat‍

On Monday, the price of gold and silver declined as concerns about the banking system subsided and the yield on U.S. Government bonds increased in price, taking some of the safe-haven appeal away from precious metals, which has been supporting a multiweek run.

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Price Movement

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• After recording their fourth consecutive weekly gain on Friday, April gold GC00, -1.29% GCJ23, -1.29% decreased by $35.40, or 1.8%, to $1,948.40 per ounce on Comex.

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• Silver for May delivery fell by 25.4 cents, or 1.1%, to $23.085 per ounce SI00, -0.85% SIK23, -0.85%.

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• Although April platinum PLJ23, -0.27% fell by $4.90, or 0.5%, to $979 per ounce, June palladium PAM23, -0.21% dropped by $10.90, or 0.8%.

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• To reach $4.053 per pound, May copper prices HGK23, -0.11% dropped by 2.2 cents, or 0.5%.

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Market Forces

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Over the past month, gold has changed from being "a barometer for financial stress," according to Marios Hadjikyriacos, chief investment analyst at XM.

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Other variables, such as how the banking system performs and if the Federal Reserve reduces interest rates that are being factored in by futures investors actually occur, will determine whether the price of precious metals continues to rise, he noted.

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With this ferocious run in gold, "peak stress" appears to have passed, thus a retracement is possible, according to Hadjikyriacos.

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On Monday, Treasury yields increased, with the rate on the 10-year note TMUBMUSD10Y rising by over 12 basis points to 3.501% from 3.489%.

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Naeem Aslam, chief investment officer of Zaye Capital Markets, notes that although if gold futures prices have refrained from pushing their record high after briefly crossing the crucial $2,000 level last week, that doesn't always signal that another cycle of regression would start.

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According to Aslam, there are "good odds" that the Federal Reserve would ease its aggressive monetary policy. If not, "it is extremely likely that we are not far from level currently," adding that "it is likely that we may have already achieved the peak in terms of the interest rate cycle."

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The canadian dollar will start to lose momentum even more as a result, which "makes the case a lot better for the price of gold to move higher," he said.

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According to Aslam, the possibility of a European or American banking catastrophe "keeps traders extremely on their toes." Investors continue to lack confidence in a significant way, believing that the likelihood of a fall before a recovery is much higher.