Gold and silver futures settled lower on Wednesday after Fitch Ratings lowered the U.S. government’s credit rating Tuesday evening, following its warning it may do so earlier this year in the wake of the debt-ceiling fight in Congress, while the latest report shows the U.S. economy saw a robust gain in private-sector jobs in July, according to private payrolls processor ADP.
Price action
-
Gold futures for December delivery
GC00,
-0.29% GCZ23,
-0.29%
dropped by $3.80, or 0.2%, to settle at $1,975 per ounce on Comex. -
Silver futures for September delivery
SI00,
-0.83% SIU23,
-0.83%
lost 45 cents, or 1.9%, to end at $23.87 per ounce. -
Palladium futures for September
PA00,
+0.94% PAU23,
+0.94%
rose by $4.70, or 0.4%, to finish at $1,241.80 per ounce, while platinum futures for October
PL00,
-1.03% PLV23,
-1.03%
delivery fell by $10, or 1.1%, ending at $930.40 per ounce. -
Copper futures
HG00,
+1.38% HGU23,
+1.38%
declined by 6 cents, or 1.7%, to settle at $3.84 per pound.
Market drivers
Gold prices pared gains to finish slightly lower on Wednesday, hurt by a stronger U.S. dollar and rising Treasury yields as investors assessed the Fitch Ratings’ decision to lower the U.S. credit rating to AA+ from AAA.
Not long after U.S. markets closed on Tuesday, Fitch Ratings announced it had cut the U.S. government’s credit rating, citing expected fiscal deterioration over the next few years and “the erosion of governance” exemplified by the standoff over raising the debt ceiling in May.
Fitch had warned earlier this year that it was considering a downgrade. Following this decision, only one of the three major ratings houses rates the U.S. government’s debt as top-tier: Moody’s Investors Service. Standard & Poor Global Rating has dropped its AAA rating for the U.S. back in 2011.
See: Fitch cuts U.S. credit rating: Here’s what you need to know
The decision had a mixed impact across U.S. financial markets, sinking stocks but leaving the U.S. dollar and the yellow metal little changed. Meanwhile, Treasury yields rose on rising debt sale expectations.
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
rose 6 basis points to 4.165% from 4.104% late Tuesday. Tuesday’s level was the highest since Nov. 9, according to Dow Jones Market Data. The yield on the 10-year Treasury
BX:TMUBMUSD10Y
advanced 3 basis points to 4.072% from 4.048% Tuesday afternoon.
See: How Fitch downgrade might impact Treasury’s $1 trillion third-quarter borrowing plans
“The gold market is going to struggle as long as re-steepening of the U.S. curve continues. The VIX is rising and it seems Wall Street is getting nervous here,” said Edward Moya, senior analyst at OANDA, in emailed commentary on Wednesday.
The Cboe volatility index, rose 15.5% to 16.1, the highest level since May 31, according to FactSet data.
The ICE U.S. Dollar Index
DXY
rose 0.2% to 102.55 on Wednesday afternoon.
In U.S. economic data, the latest ADP report shows the private sector payrolls rose by 278,000 in May, according to the payroll services firm ADP on Thursday.
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