Gold Set For First Loss in Five Days With Yields Gaining
Traders will be watching for the U.S. CPI report due Wednesday, which is forecast to show prices continued to increase in April.
(Bloomberg) -- Gold erased gains, heading for its first loss in five days as bond yields inched up and the dollar pared losses.
The yield on the 10-year Treasuries pushed higher as investors remained on edge over the threat of inflation. Rising yields hurt demand for non-interest-bearing bullion. Ebbing losses in the dollar reduced the appeal of bullion as an alternative asset.
The drop comes as bullion has been recouping early 2021 losses, posting its biggest weekly gain since November last week after a surprise slowdown in U.S. job growth supported the case for continued economic stimulus and low interest rates. While rising inflation expectations could eventually boost demand for gold as a hedge, the rebound in yields is damping investor interest for now, analysts said.
“We’ve seen some profit-taking and a sudden dearth of buyers” after yields rose, said Tai Wong, head of metals derivatives trading at BMO Capital Markets.
Spot gold fell as much as 1% before paring losses to trade at $1,834.80 an ounce by 2:22 p.m. in New York, after reaching $1,845.51 on Monday, the highest since Feb. 11. Futures for June delivery on the Comex fell 0.1% to settle at $1,836.10 an ounce. Spot silver advanced, while platinum and palladium slipped.
Treasuries faced selling pressure during the U.S. morning as dealers prepared to underwrite first of three auctions this week.
“I do think we hold this level around $1,820 for the moment, with $1,800 the real bulwark, and wouldn’t expect a significant test of that area unless tomorrow’s 10-year auction is poor.”
April’s disappointing employment report doesn’t change the upbeat outlook for the U.S. labor market amid strong consumer demand, Federal Reserve officials said.
Chicago Fed President Charles Evans said the U.S. central bank will need to remain accommodative “until we really get nervous that inflation is just in excess of averaging 2% over time.”
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