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Metals Stocks: Gold edges lower, but remains underpinned by falling bond yields

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Gold futures edged lower Wednesday as equities bounced back, dulling its haven appeal, but the yellow metal remains underpinned as government bond yields remain under pressure in the wake of an emergency interest rate cut a day earlier by the Federal Reserve.

Gold for April delivery GCJ20, -0.19%  on Comex fell 70 cents, or 0.1%, to $1,643.70 an ounce, while May silver SIK20, -0.10%  was down 2.8 cents, or 0.2%, to $17.16 an ounce.

Gold saw sharp gains Tuesday as investors dumped equities and other assets perceived as risky for traditional havens, including Treasurys and precious metals, after the Federal Reserve delivered an emergency, intermeeting rate cut of 50 basis points in an effort to cushion the economy from any disruptions tied to the spread of COVID-19. Treasury prices soared, pushing down yields, with the rate on the 10-year note TMUBMUSD10Y, -0.10%  dropping below 1% for the first time.

“The Fed has given gold bulls a shot in the arm, as rising expectations for more coordinated policy easing by global central banks offer fresh upside to bullion prices,” said Han Tan, market analyst at FXTM, in a note. “Even if the human toll from the coronavirus outbreak were to stabilize over the immediate term, investors still have to wait to find out what the eventual global economic cost is over the coming months. Gold is expected to remain supported amid such drawn-out uncertainties.”

The drop in Treasury and other global bond yields was seen as a boost for gold, reducing the opportunity cost of holding a nonyielding asset.

U.S. stocks, however, were in rebound mode Wednesday, with futures pointing to a sharp jump for equities after the previous session’s tumble.