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Markets

Gold slips as firmer US yields dull appeal

  • US CPI data due on Tuesday.
  • US economy at "inflection point," Fed chair says.
12 Apr 2021

Gold fell on Monday as an uptick in US Treasury yields dimmed bullion's appeal, while investors awaited key US inflation and retail sales data for cues on economic health.

Spot gold was 0.6% down at $1,733.40 an ounce by 10:26 a.m. EDT (1426 GMT). US gold futures eased 0.6% to $1,734.20.

"The bond yields have stabilized right now, but they (elevated yields) are still an underlying negative for the metals markets that produce no dividend or yield," said Kitco Metals senior analyst Jim Wyckoff. "The bulls lost a little bit of momentum and that is prompting shorter term technical traders to press the sell side, putting prices under pressure."

Benchmark US Treasury yields edged higher on Monday before the Treasury Department's sale of $96 billion in new three-year and 10-year notes, and ahead of key data releases this week, including consumer price inflation.

Retail sales data is also expected on Thursday.

Higher yields have threatened gold's appeal as an inflation hedge as they increase the opportunity cost of holding bullion, which pays no interest.

Federal Reserve Chair Jerome Powell, in comments that aired on Sunday night, said the US economy is at an "inflection point," with hopes of more growth and hiring in the coming months, while risks of a spike in COVID-19 cases if there is a hasty reopening lingered.

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 to rein it in.

StoneX analyst Rhona O'Connell said gold is likely to benefit if inflation rises much higher than the target, but added that "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 1.6% to $24.83 per ounce, palladium was up 0.5% at $2,652.01 and platinum slipped 1.6% to $1,178.99.