NEW YORK: Gold fell on Monday as an uptick in US Treasury yields weighed on bullion’s appeal, while investors awaited key US inflation and retail sales data to gauge the health of the economy.
Spot gold fell 0.6 % to $1,732.14 per ounce by 1:57 p.m. EDT (1757 GMT). US gold futures settled down 0.7% at $1,732.70.
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.”
US Treasury yields remained slightly higher following a good three-year note auction, and ahead of key data releases this week, including consumer price inflation on Tuesday.
Retail sales data is expected on Thursday.
Higher yields threaten 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 aired on Sunday, said the US economy was at an “inflection point,” with hopes of more growth and hiring in the coming months. He also cited risks of a spike in COVID-19 cases if there is a hasty reopening.
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.
Gold is likely to benefit if inflation rises much higher than the target, said StoneX analyst Rhona O’Connell. “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 1.7% to $24.82 per ounce. Palladium gained 1.3% to $2,674.68 per ounce and platinum dipped 2.3% to $1,170.90, having earlier hit a near two-week low of $1,164.50.
The world’s largest palladium producer, Russia’s Nornickel said it will fully restart operations this month at one of two major mines hit by flooding, earlier than previously expected.