Gold slips as firmer U.S. yields dull appeal

Gold bars and coins are stacked in the safe deposit boxes room of the Pro Aurum gold house in Munich
Shreyansi Singh
·2 min read

By Shreyansi Singh

(Reuters) - Gold fell on Monday as an uptick in U.S. Treasury yields dimmed bullion's appeal, while investors awaited key U.S. inflation and retail sales data for cues on economic health.

Spot gold was 0.5% down at $1,734.31 an ounce by 11:23 a.m. EDT (1523 GMT). U.S. gold futures eased 0.6% to $1,734.60.

"The bond yields have stabilized right now, but they (elevated yields) are still an underlying negative for the metals markets that produce no dividend or yield," said Kitco Metals senior analyst Jim Wyckoff. "The bulls lost a little bit of momentum and that is prompting shorter term technical traders to press the sell side, putting prices under pressure."

Benchmark U.S. Treasury yields edged higher on Monday before the Treasury Department's sale of $96 billion in new three-year and 10-year notes, and ahead of key data releases this week, including consumer price inflation.

Retail sales data is also expected on Thursday.

Higher yields have threatened gold's appeal as an inflation hedge as they increase the opportunity cost of holding bullion, which pays no interest.

Federal Reserve Chair Jerome Powell, in comments that aired on Sunday night, said the U.S. economy was at an "inflection point," with hopes of more growth and hiring in the coming months, but he also cited risks of a spike in COVID-19 cases if there is a hasty reopening.

A new Fed framework builds in allowances for inflation to run above the central bank's 2% target for a time without the Fed intervening to rein it in.

Gold is likely to benefit if inflation rises much higher than the target, said StoneX analyst Rhona O'Connell. "If we do start seeing inflation accelerating and people start thinking interest rates are going to go up again, then gold might struggle a bit."

Among other precious metals, silver fell 1.6% to $24.84 per ounce, palladium was up 0.4% at $2,650.98 and platinum slipped 2.1% to $1,173.87.

(Reporting by Shreyansi Singh and Sumita Layek in Bengaluru; Editing by Will Dunham and Richard Chang)