Gold faces headwinds from strong China factory data

Gold prices inched lower on Wednesday as data showing a faster-than-expected growth in China's factory activity weighed on the metal's safe-haven appeal, while a surge in US Treasury yields added further pressure.

FUNDAMENTALS

Spot gold was down 0.1% to $1,683.56 per ounce by 0129 GMT. US gold futures were flat at $1,685.10 per ounce.

China's factory activity expanded at a faster-than-expected pace in March, official data showed, as factories that had closed for the Lunar New Year holiday resumed production to meet improving demand.

The US 10-year Treasury yield rose as far as 1.776% on Tuesday, its highest since Jan. 22.

Higher returns on bonds increase the opportunity cost of holding non-yielding bullion.

US consumer confidence surged in March to its highest level since the start of the COVID-19 pandemic, supporting views that economic growth will accelerate in the coming months.

Federal Reserve policymakers are optimistic about the US economic outlook as more Americans are vaccinated and government aid gets to households and businesses, and they are not going to stand in its way.

The International Monetary Fund will raise its forecast for global economic growth in 2021 and 2022 after last year's 3.5% contraction, IMF Managing Director Kristalina Georgieva said on Tuesday.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.1% to 1,037.50 tonnes on Monday from 1,036.62 tonnes on Friday.

Silver was steady at $24.01, while platinum rose 0.5% to $1,160.05 and palladium was up 0.7% at $2,607.04.