Surging US Treasury yields and firmer dollar weigh on gold

Bengaluru — Gold prices fell on Monday, weighed down by surging US Treasury yields and a firmer dollar after better-than-expected US economic data lifted prospects for higher inflation.

Spot gold fell 0.3% to $1,738.12 per ounce by 5.50am. US gold futures were down 0.4% to $1,737.70 per ounce.

“Stronger-than-expected data suggests that inflation [will be] picking up faster than expected in months to come, which is leading to a rise in real yields, exerting pressure on gold,” said Margaret Yang, a strategist at DailyFX.

Producer prices in the US rose more than anticipated in March, resulting in the highest annual rise in 9½ years and signalling the start of higher inflation as the economy reopens amid strengthened public health and substantial government assistance.

Some investors view gold as a hedge against higher inflation, but higher Treasury yields dull some of the appeal of the non-yielding metal.

Federal Reserve chair Jerome Powell said the US economy is at an “inflection point”, with hopes that inflation and hiring will accelerate in the coming months, but there are dangers if a hasty reopening leads to a continuing uptick in coronavirus cases.

Asian shares fell as investors waited to see whether US results will support sky-high valuations, while bond markets could be checked this week by what could be very good readings for US inflation and retail sales.

“Asia Pacific markets were expected to open higher but they are trading lower this morning, raising demand for safe assets, and [the] dollar is winning that race, putting further pressure on gold,” Yang said.

The dollar index rose 0.1% against rival currencies, making gold expensive for buyers outside the US. Elsewhere, silver fell 0.4% to $25.13 and palladium was down 0.3% to $2,630.78. Platinum slipped 0.6% to $1,191.87.

Reuters