Gold Erases Gains as U.S. Treasury Yields, Dollar Advance

Gold erased gains, heading for its second decline in three sessions as a rebound in U.S. Treasury yields curbed demand for the non-interest-bearing metal.

Treasury 10-year yields rose after slumping earlier Tuesday on speculation that the Federal Reserve will keep supporting the economy with ultra-low rates amid a resurgence in global coronavirus cases. A firmer dollar also diminished the appeal of bullion as an alternative asset.

The metal is stalling after four straight weekly gains as investors try to parse a host of economic cross-currents, including the outlook for yields, monetary policy and global growth. Gold, often used as a haven during times of market turmoil, is being buffeted even as new waves of Covid-19 cast a pall over prospects for a robust economic recovery.

Bullion’s “inability to rally despite the ongoing risk-off highlights that speculative flows remain particularly weak, reinforcing the potential for a deeper pullback,” TD Securities analysts led by Bart Melek said in a note.

Gold Erases Gains as U.S. Treasury Yields, Dollar Advance

Anything that forces central banks to prolong their stimulus will be welcomed by gold. In June the metal endured its worst month since 2016 after the Fed brought forward its forecast rate hikes amid fears about inflation. Data last week showed prices paid by U.S. consumers rose the most in more than a decade.

“While upside inflation prints may be giving fuel to the monetary hawks, rising Covid cases may deter the central bank from pressing the brakes prematurely,” Nitesh Shah, director of research at WisdomTree.

Spot gold fell 0.1% to $1,810.35 an ounce by 1:57 p.m. in New York. Futures for August delivery on the Comex rose 0.1% to settle at $1,811.40. Spot silver and platinum fell, while palladium gained. The Bloomberg Dollar Spot index rose as much as 0.3%.

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