Gold futures headed for back-to-back losses on Thursday and potentially the sharpest decline in bullion in almost six weeks as the U.S. dollar and Treasury yields popped higher following data showing a rise in retail sales last month.

Confidence in gold “has been light, vulnerable even, especially with the broad commodity complex enjoying another rally — not to mention bitcoin,” said Ross Norman, chief executive officer at Metals Daily.

“Clearly, the unexpectedly strong U.S. retail sales have boosted the dollar and gold has corrected sharply lower,” he told Marketwatch. “It appears the move lower has been accelerated by stops being triggered and is now touching support at $1,750.”

For now, “the path of least resistance looks to be lower and I suspect the bears will be hammering on the support levels to test the resolve of the bulls,” he said.  

Meanwhile, investors note that prices for precious metals are expected to be choppy as investors await clarity from the U.S. Federal Reserve next week on its plans for tapering bond purchases that provided liquidity to markets during the worst of the pandemic back in the spring of 2020.

Metals traders also will be watching for clues on the timing of eventual interest-rate hikes. The Fed’s two-day gathering is set for Sept. 21-22.

December gold
GC00,
-2.27%

GCZ21,
-2.27%

fell $45.40, or 2.5%, at $1,749.40 an ounce, which would mark the steepest daily decline for bullion since Aug. 6, when it fell $45.80, or 2.5%. A settlement around the current level would be the lowest since Aug. 10, FactSet data show. On Wednesday, prices fell 0.7%.

Gold “experienced a quick and sudden chain reaction,” as robust economic data exceeded expectations by a lot, Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch.

U.S. jobless claims were slightly higher but “in a meaningful way to offset strength” of retail spending data, he said, which caused U.S. Treasury 10-year yields to go up. “The result is gold went lower and very quickly.” 

U.S. initial jobless benefit claims rose 20,000 to 332,000 in the week ended Sept. 11, the government said Thursday. Retail sales increased 0.7% last month, though economists polled by The Wall Street Journal had forecast a 0.7% drop.

Separately, the Philadelphia Federal Reserve’s business activity index rose to 30.7 in September from 19.4 in August, snapping a four-month streak of declines, the regional bank said Thursday.

Given the latest turn of events and the Fed’s desire to taper asset purchases, Wright believes gold has “room to drop further in coming days,” and doesn’t see any positive catalyst in the near term. “Gold could not surpass and hold $1,800 so it could retest $1,700 without any new interest coming into the market.”

Meanwhile, December silver
SIZ21,
-4.44%

SI00,
-4.44%

was down $1.14 cents, or 4.8%, to trade at $22.66 an ounce, on track to log the lowest finish so far this year.

Thursday’s metal moves come as the U.S. dollar, as measured by the ICE U.S. Dollar Index
DXY,
+0.40%
,
was up 0.4% on the day and for the week so far. A stronger dollar can make assets priced in the currency comparatively more expensive to overseas buyers. Benchmark 10-year Treasury note yields
TMUBMUSD10Y,
1.341%

are up 4 basis points at around 1.347%, compared with $1.302% on Wednesday afternoon.

Among other Comex metals, December copper
HGZ21,
-2.22%

lost 2.8% to $4.28 a pound. October platinum
PLV21,
-0.11%

shed 0.6% to $925 an ounce.

December palladium
PAZ21,
+1.10%

tacked on nearly 0.5% to $2,004.50 an ounce, looking to stretch its gain into a second straight session after dropping Tuesday to its lowest finish in over a year.

Also read: Why some benchmark aluminum prices have soared to a record

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