NEW YORK: Gold prices slid over 1% on Monday to a nine month-low, as the dollar and US Treasury yields kept rising, prompting investors to dump the non-yielding metal. Spot gold fell 1.2% to $1,680.01 per ounce by 12:26 p.m. EDT (1726 GMT), after hitting its lowest since June 5 at $1,676.10. US gold futures declined 1.5% to $1,673.70.
The dollar climbed to a three-month peak, while the US 10-year Treasury yield held near a more than one-year high, raising the opportunity cost of holding the non-interest bearing metal.
“We have an economy that is recovering and inflation is materializing; that ultimately means yields have room to move higher,” said Bart Melek, head of commodity strategies at TD Securities, adding that gold could fall towards $1,660 from the fallout.
Melek also noted that an unexpected jump in US non-farm payroll numbers and a strong stock market were more a reflection of an improving economy and less of “critically high” inflation.
Gold is seen as a hedge against inflation. US Congressional approval of President Joe Biden’s $1.9 trillion COVID-19 relief plan failed to keep the metal afloat. Analysts also said US Federal Reserve Chair Jerome Powell’s failure to address the recent surge in US yields last week further pressured gold.
Though markets haven’t got much pushback from the Fed on yields, few doubt the Fed isn’t going to act eventually and with rate hikes unlikely this year, that support gold, said Edward Moya, senior market analyst at OANDA. But in the near-term gold could trade between $1,650 and $1,700, with a move below $1,650 likely to invite some selling pressure, he added.
Reflective of sentiment, SPDR Gold Trust holdings, the world’s largest gold-backed exchange-traded fund, fell to a 10-month low on Friday. Silver was flat at $25.19 an ounce. Palladium fell 0.7% to $2,322.98, while platinum rose 1.8% to $1,149.78.
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