Gold at over one-week low as dollar, yields climb, ME tensions stoke inflation

NEW YORK: Gold fell to a more than one-week low on Friday as US Treasury yields and the dollar climbed, while heightening inflation concerns due to the Iran war reinforced bets for higher interest rates.

Spot gold was down 2percent at USD4,557.61 per ounce by 2:06 p.m. EDT (1806 GMT) after hitting its lowest level since May 4 earlier in the session.

Prices were down 2.5percent so far this week. US gold futures for June settled 2.7percent lower at USD4,561.90. “There was a selloff across the (precious metals) for a couple of reasons. The dollar is quite strong today. We’re also seeing not just a US increase, but a global increase in (bond) yield rates,” said Edward Meir, an analyst at Marex.

Benchmark 10-year US Treasury yields rose to a near one-year high, increasing non-yielding bullion’s opportunity cost. The dollar was set for its highest weekly gain in two months, making greenback-priced gold more expensive for overseas buyers.

US President Donald Trump said his patience with Iran is running out and left China with no major breakthroughs on trade or tangible help to end the war. Crude oil prices have risen more than 40percent since the war began on February 28, leading to higher inflation globally. Central banks tend to hike interest rates during times of inflation, which in turn tends to dim non-yielding bullion’s appeal.

Traders have largely priced out US interest rate cuts this year while bets for a hike have risen, according to CME’s FedWatch Tool. Spot silver fell 7.7percent to USD77.07 per ounce, platinum lost 3.6percent to USD1,982.47, and palladium was down 1.5percent at USD1,415.09. All three were headed for weekly losses.

StoneX analyst Rhona O’Connell said silver was overbought and was in need of correction. Silver fell as much as 9percent earlier and was on track for its worst daily performance since March 3.