Gold slumps as rising US yields, dollar dull lustre

Gold fell over 2% to an eight-month low on Friday en route for its worst month since November 2016, as a stronger dollar and elevated US Treasury yields hammered non-yielding bullion's appeal.

Spot gold was down 2% at $1,734.21 per ounce by 10:49 a.m. ET (1549 GMT), having earlier touched its lowest since June 2020 at $1,724.41. Bullion is down 6.2% so far this month.

US gold futures dropped 2.5% to $1,731.20.

"Gold is struggling due to what's going on in the bond market," said Bob Haberkorn, senior market strategist at RJO Futures, adding "(but) gold prices at these levels look like a great buy."

US 10-year Treasury yields held near their highest in over a year, while the dollar index also jumped.

Rising inflation expectations have lifted US Treasury yields more than 70 basis points so far this year, eroding gold's status as an inflation hedge since that translates into a relatively higher opportunity cost of holding the metal.

"Gold is in trouble once more and the near-term outlook isn't looking great for the yellow metal," OANDA analyst Craig Erlam said in a note.

"Rising yields and now a jump in the dollar are piling the pressure on gold and, barring a reversal in bond markets, it's tough to envisage its fortunes improving."

Meanwhile, data showed US consumer spending increased by the most in seven months in January.

But while these economic numbers do take away some safe-haven buying "the trillions (in stimulus) that have been printed have to get into the system and interest rates are expected to stay low, which should help gold and silver down the road," RJO Futures' Haberkorn said.

Silver fell 3.1% to $26.56 an ounce and was poised for its first monthly decline in three, down 1.9% so far.

Palladium declined 2.4% at $2,343.11, while platinum fell 2% to $1,191.60. However, both the auto catalyst metals were on track for a monthly gain.