Gold drops over 1pc as rising bond yields, dollar dull appeal

Gold prices slid more than 1% on Friday as a surge in US Treasury yields and a stronger dollar dented demand for non-yielding metal, pushing it towards a nine-month low hit earlier this week.

Spot gold was down 1.1% at $1,703.15 per ounce at 10:12 a.m. ET (1512 GMT). US gold futures fell 1.2% to $1,701.70.

"Rates had slumped over the last few days as a result of a short squeeze on the Treasury market. Now with rates immediately rising back to the psychologically important 1.6% is weighing on financial conditions broadly," said TD Securities commodity strategist Daniel Ghali.

"The dollar is also tied to the shadow of the rising rates. So, in this context that's obviously not the environment where investment flows are likely to move towards gold," Ghali said, adding that he expects continued pressure on gold.

Benchmark US Treasury yields rose back towards a more than one-year peak above 1.6% hit on March 5, while the dollar index jumped 0.5%.

Gold fell to its lowest since June at $1,676.10 on Monday, with prices down nearly 10% so far this year.

Although gold is widely considered a hedge against high inflation anticipated to be fueled by stimulus measures, a rebound in yields have challenged that status this year.

President Joe Biden on Thursday signed his $1.9 trillion stimulus bill into law and said he was working to move the United States closer to normality by July 4.

"For now, gold remains caught in a downtrend with key support being an important area between $1,670 and $1,690 while potential buyers are in no rush to enter longs before it manages to regain $1,765 per ounce," Saxo Bank analyst Ole Hansen said in a note.

Silver fell 1.9% to $25.58 an ounce, but was on track for its first weekly gain in four weeks. Palladium rose 0.9% to $2,365.03. Platinum lost 0.8% to $1,185.55 an ounce, but was up 4.6% for the week.