Gold set for first weekly fall in three on firmer dollar, yields

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Gold prices eased on Friday en route for their first weekly decline in three as a stronger dollar and rising U.S. Treasury yields offset support from concerns over surging coronavirus cases in Europe.

Spot gold was down 0.1% at $1,724.65 per ounce by 1225 GMT. Bullion is down 1% so far this week. U.S. gold futures were down 0.1% at $1,724 per ounce.

“A strengthening dollar, rising Treasury yields and outflows on the physically gold-backed exchange-traded fund’s are definitely the headwinds right now,” said Xiao Fu, head of commodities markets strategy at Bank of China International.

“At the same time, we have rising geopolitical risks and a third wave of the pandemic supporting gold prices as well,” she added.

The dollar index firmed near four-month peak against its rivals. Recent better-than-expected economic readings out of the United States lifted prospects of a strong U.S. economic recovery and strengthened the U.S. currency.

Benchmark U.S. Treasury yields edged towards a more than one-year high hit last week, increasing the opportunity cost of holding non-interest bearing gold.

“A stronger dollar and higher yields continue to spur further liquidation primarily from the ETF community,” said Joseph Stefans, Head of Trading at MKS.

“I think gold is trapped in a bit of a range here and I can see it trading sideways over the next week or so.”

The biggest gold-backed exchange traded fund, SPDR Gold Trust has seen outflows of more than 140 tonnes so far this year.

Meanwhile, sentiment in wider financial markets, for most part of the week, remained subdued as worries about new lockdowns and a slow pace of vaccination in the euro zone weighed on risk appetite among investors.

Elsewhere, silver inched 0.1% lower to $24.99, holding above an over two-month low of $24.39 per ounce hit on Thursday.

Palladium gained 0.9% to $2,633.07 and platinum rose 0.5% to $1,153.12.

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