Gold futures down 9.5% for the first quarter
Gold futures ended higher on Wednesday, with prices recovering recent losses that dragged prices to a more than three-week low, but the precious metal still suffered its biggest quarterly loss since the fourth quarter of 2016.
The metal gained Wednesday in what appeared to be quarter-end short covering, said Chintan Karnani, chief market analyst at Insignia Consultants.
Gold’s decline for the first quarter, however, is “largely the result of investors reducing exposure after inflation concerns abated,” said Timothy Hanna, co-portfolio manager of the Gold Bullion Strategy Fund QGLDX, +1.59%.
On a technical basis, the “death cross” chart pattern seen in February, when the 50-day moving average crossed below the 200-day moving average, “exacerbated the sell-off through March, as gold attempts to find new support levels.”
On Wednesday, the front-month April gold contract GCJ21, 0.69% tacked on $29.90, or 1.8%, to end at $1,713.80 an ounce. That followed a nearly 1.7% slump for the precious metal on Comex Tuesday, which sent prices to their lowest finish since March 8, according to FactSet data.
June gold GCM21, 0.85% GC00, 0.85%, which is now the most active, rose $29.60, or 1.8%, to end at $1,715.60.
Prices based on the most-active contract saw a monthly loss of 0.8%, according to Dow Jones Market Data. For the quarter, it was down 9.5% — the largest quarterly percentage loss since the fourth quarter of 2016.
May silver SIK21 SI00 added 39 cents, or 1.6%, to finish at $24.53 an ounce. It was 7.2% lower for the month and lost 7.1% for the quarter.
Some of the losses for gold this year have been attributed to rising interest in bitcoin, which some analysts said lured investors away from bullion.
However, Hanna, who’s also senior portfolio manager at Flexible Plan Investments, said gold “maintained a nearly zero correlation to bitcoin during the first quarter, minimizing concerns that investors are fleeing gold in favor of bitcoin as an alternative inflation hedge.”
“We expect the near-term price of gold to be heavily influenced by investor sensitivity to inflation data and market volatility,” he said.
On Wednesday, gold prices were up as investors parsed U.S. private-sector employment data, ahead of a key jobs report due later this week. Commodity investors also await details on an infrastructure plan from President Joe Biden, which could deliver another boost to the pandemic-stricken U.S. economy.
A private-sector report from ADP, ahead of the closely followed Labor Department data due on Friday, showed that the U.S. added 517,000 jobs in March, marking the biggest gain in six months as a decline in coronavirus cases allowed more businesses to reopen or expand hours.
The private-sector report delivers further evidence of a strengthening U.S. economy that is being powered by a massive $1.9 trillion federal aid package and rollout of COVID vaccines.
Of course, “what really matters the most” is the nonfarm payrolls data due on Good Friday, said Naeem Aslam, chief market analyst at AvaTrade, adding that bad economic news would mean no hawkish monetary stance, which can provide support for gold.
Looking ahead, Biden is slated to announce the first part of his “Build Back Better” plan in Pittsburgh later Wednesday, which will detail a $2 trillion or more in spending on infrastructure. The higher levels of government spending, combined with the Federal Reserve’s easy-money policy, could spur inflation and undermine the U.S. dollar.
Precious metals have slumped as the dollar has strengthened, with the ICE U.S. Dollar Index DXY, -0.24%, up 2.5% in March and 3.5% in the first quarter. A stronger dollar can make dollar-price assets comparatively more expensive to overseas buyers.
Rising bond yields also have been a headwind for metals, which have benefited from haven flows during the pandemic, with the 10-year Treasury note TMUBMUSD10Y, 1.683% hitting a 14-month high above 1.76% in recent trade. Precious metals don’t offer a coupon like bonds.
Rounding out action on Comex Wednesday, May copper HGK21, -0.29% added 0.4% to nearly $4 a pound Wednesday, for a monthly loss of 2.4%, but prices gained almost 14% for the quarter.
July platinum PLN21, 1.47% tacked on 2.7% to $1,191.50 an ounce, 0.5% higher for the month and about 10% higher for the first quarter. June palladium PAM21, 1.40% gained 2% to $2,619.90 an ounce — up 13% for the month and up 6.8% for the quarter.