Gold heads for second monthly decline as US yields rally

Gold inched higher after hitting a one-week low on Friday, but headed for a second straight weekly and monthly decline as brighter economic outlook and inflation fears propped up US Treasury yields.

Spot gold was up 0.2% to $1,773.06 per ounce by 0303 GMT, having earlier fallen to its lowest since Feb. 19 at $1,764.90. Prices were down 0.6% for the week and 4% for the month so far.

US gold futures fell 0.2% to $1,771.80 on Friday.

Prices had dropped 1.9% on Thursday as benchmark US Treasury yields hit their highest since the pandemic began, lifting the dollar.

"Rising inflation expectations as markets price in the reopening of developed market economies are pushing yields higher and pressuring gold," said OANDA senior market analyst Jeffrey Halley.

Higher inflation boosts gold but also lifts Treasury yields, which in turn increase the opportunity cost of holding non-yielding bullion.

"While gold is gaining slightly on some risk hedging for the weekend, the overall picture looks dire. Gold is now in danger of a material move lower, if yields rise again," Halley said.

Reflecting investor sentiment, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.6% on Thursday to its lowest since May 2020.

The US Federal Reserve's comment that it is not concerned with rising bond yields has added to gold's misery, Phillip Futures said in a note, adding that the $1,760 level continued to be a major support for the metal.

Silver eased 0.2% to $27.34 an ounce, but was poised for a third straight monthly rise, while palladium climbed 0.8% to $2,420.68 and was set to register its best month in a year with a more than 8% gain.

Platinum rose 0.6% to $1,223.79 and was set to mark its best month since February 2008 with over 14% gain.