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Markets

Gold eases as US yields hold firm; inflation data in focus

  • Markets look to US CPI data on Tuesday.
  • US producer prices hit 9-1/2-year high.
  • US economy at "inflection point", says Fed Chair.
Published April 12, 2021

Gold prices eased on Monday as US Treasury yields remained elevated, denting the appeal of bullion, while investors waited for this week's key US inflation and retail sales data.

Spot gold was 0.1% down at $1,741.80 an ounce by 1147 GMT. US gold futures eased 0.1% to $1,743.50.

As long as yields are relatively high, gold will not benefit, said ABN Amro analyst Georgette Boele, adding that the market is now focused on US March Consumer Price Index data due on Tuesday.

Benchmark US Treasury yields gained after data on Friday showed US producer prices in March registered their largest annual gain in 9-1/2 years, likely marking the start of higher inflation as the economy reopens.

Retail sales data is also due on Thursday.

While gold is considered a shield against inflation, higher yields threaten that status because they translate into a higher opportunity cost of holding bullion.

Federal Reserve Chair Jerome Powell said the US economy is at an "inflection point", with hopes that inflation and hiring will accelerate in the coming months.

A new Fed framework builds in allowances for inflation to run above the central bank's 2% target for a time without the Fed intervening.

StoneX analyst Rhona O'Connell said gold is likely to benefit if inflation rises much higher than the target.

"(Although) if we do start seeing inflation accelerating and people start thinking interest rates are going to go up again, then gold might struggle a bit."

Among other precious metals, silver fell 0.2% to $25.20, palladium was down 0.5% at $2,626.65 and platinum slipped 1.1% to $1,185.56.

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