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Markets

Gold gains in tug-of-war between lower yields and firm dollar

  • U.S. benchmark Treasury yields continued their dip, translating into lower opportunity cost of holding bullion, after scaling one-year highs last week.
Updated 26 Mar 2021

Gold gained on Thursday as lower U.S. Treasury yields boosted the appeal of the non-yielding metal and eclipsed pressure from a strengthening dollar.

Spot gold rose 0.3pc to $1,739.60 per ounce by 10:22 A.M EDT (1422 GMT). U.S. gold futures were up 0.3pc at $1,739.30 per ounce.

U.S. benchmark Treasury yields continued their dip, translating into lower opportunity cost of holding bullion, after scaling one-year highs last week .

"I don't think it (gold) has much more downside and traders are looking for a bottom on the fact that short-term yields and the rise in the dollar are not sustainable," said Bob Haberkorn, senior market strategist, RJO Futures.

The dollar hit a four-month high versus rivals.

Also aiding gold, sentiment in wider financial markets remained weak as investors grew wary following a new round of coronavirus restrictions in the euro zone.

"(But) The momentum (for gold) is on the bearish side, so you're going to have to see prices rebound a little bit for the bulls to gain some confidence that some kind of upward sustainability can be achieved," said Kitco Metals senior analyst Jim Wyckoff.

Gold's gains were kept in check by data showing the number of Americans filing new claims for unemployment benefits dropped to a one-year low last week, a day after U.S. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell expressed their confidence in the U.S. recovery.

Silver rose 0.2pc to $25.13 an ounce, having earlier fallen to a more than two-month low of $24.39.

Palladium rose 0.4pc to $2,646.31 and platinum gained 0.4pc to $1,172.04.

While there could be more platinum supply from South Africa this year, rising auto demand will likely spur shortfalls in coming years, Commerzbank said in a note.

Palladium will likely remain "severely undersupplied" this year, with prices as high as $3,000 "conceivable" the bank added, raising forecasts for both autocatalyst metals.

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