Gold Pares Weekly Drop as Dollar Wavers and Yield Gains Ebb
(Bloomberg) -- Gold advanced, paring a weekly loss as the dollar slipped and bond yields retreated from session highs.
The dollar fell against most Group-of-10 currencies, making bullion more attractive for investors holding other currencies. Treasury futures pared losses while cash yield curves retreated from the steepest levels of the session after softer-than-expected U.S. personal spending figures.
The precious metal is still heading for its first weekly loss in three, underscoring its fitful comeback from a nine-month low. Optimism over a recovery from the pandemic, a resilient dollar and a rise in bond rates that reduce the appeal of non-interest-bearing bullion continue to thwart a sustained rebound in the metal.
“Gold prices remain in limbo despite recent weakness in real yields, highlighting the change in regime from an inflation-hedge product into a safe-haven asset today,” TD Securities analysts led by Bart Melek said in a note. “This continues to place a wet blanket on the prospects of increasing investment flows.”
U.S. household spending declined in February and incomes fell as the initial boost from stimulus checks at the start of the year faded. A key measure of inflation remained tepid. Due to the very weak inflation prints seen at the start of the pandemic, year-over-year increases in the price metrics will appear large starting with March data, although Federal Reserve officials expect any surge in prices will prove temporary.
“While there will be higher inflation in the U.S., it is important to keep in mind that this is first a reflection of the strong growth backdrop and, second, unlikely to last,” Carsten Menke, an analyst at Julius Baer Group Ltd., wrote in a note. “It is not the kind of inflation that will lift safe-haven demand and lead to lastingly higher gold and silver prices.”
Spot gold rose 0.2% to $1,730.41 an ounce by 2:18pm in New York, and is on track for a 0.8% fall this week. Futures for June delivery on the Comex rose 0.4% to settle at $1,734.70 an ounce. Spot silver fell, while palladium and platinum rose. The Bloomberg Dollar Spot Index declined 0.1%.
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