Gold Declines as Treasury Yields Advance, Dollar Pares Losses
Gold bars weighing one kilogram each sit on a table in the vault of gold vendor in Munich, Germany. (Photographer: Guenter Schiffmann/Bloomberg)

Gold Declines as Treasury Yields Advance, Dollar Pares Losses

(Bloomberg) -- Gold slipped as the dollar pared losses and yields on U.S. Treasuries surged, damping the appeal of the metal because it doesn’t pay interest.

Yields on 10-year Treasuries reached a one-month high after a key measure of U.S. consumer prices rose more than forecast in June. The price report could complicate the Federal Reserve’s assessment of inflation as policy makers weigh an interest-rate cut as soon as this month.

Gold “is sort of caught between cross-currents,” Ed Meir, an analyst at INTL FCStone Inc., said by phone. “The bearish influence is the fact that the dollar has come back from being weaker today to unchanged and also the fact that rates are going up in response to the higher inflation numbers we got. So higher rates, stronger dollar is bearish for gold.”

Gold Declines as Treasury Yields Advance, Dollar Pares Losses

Gold futures for August delivery fell 0.4% to $1,406.70 an ounce at 1:32 p.m. on the Comex in New York, after rising as much as 1.2% earlier. An index of the dollar was down 0.1% after falling as much as 0.3%.

Exchange-traded funds backed by the precious metal have been rising, with holdings reaching 2,311.3 metric tons as of Wednesday, the most since 2013.

The sell-off in gold could be short-lived with central banks signaling a dovish stance, analysts said. Even with stronger-than-expected U.S. inflation data Thursday, traders are still pricing in a July rate cut by the Fed as a certainty.

The price data was “probably not enough to change the mindset of the Fed given how long inflation has been quiescent,” Tai Wong, head of base and precious metals derivatives trading at BMO Capital Markets, said an email. “It will take more than one stronger print in inflation to even register for Fed policy makers.”

In other precious metals, silver futures settled lower on the Comex. Palladium declined on the New York Mercantile Exchange, while platinum gained.

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