Global gold prices inch down on higher US treasury yields

Gold prices slipped on Wednesday as a surge in US treasury yields and an ongoing rally in equities dented the precious metal’s safe-haven appeal.

Spot gold was down 0.1% at $1,311.56 an ounce by 8.04am. It declined 0.6% on Tuesday, in its biggest one-day drop in a month. US gold futures were down 0.1% at $1,312.50 an ounce on Wednesday.

Benchmark US Treasury yields hit a 10-month high on Tuesday after the Bank of Japan tweaked its bond-buying programme. Wall Street’s major indexes extend the New Year rally to record levels into a sixth day on Tuesday, but Asian shares slipped on Wednesday on profit-taking.

“We are wary about going long on gold at these levels... The spike in US treasury yields is an obvious negative, as is the fact that the dollar is now quite oversold against a number of currencies,” said INTL FCStone analyst Edward Meir. “We are particularly concerned by the latest CFTC data showing dollar short positions at multi-year highs and so a short-covering rally cannot be ruled out.”

A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.

The dollar index, which tracks the greenback against a basket of six major rival currencies, was down 0.1% at 92.423. It touched a more than one-week high at 92.640 on Tuesday.

The US Federal Reserve should keep interest rates low so that wage gains accelerate and inflation rises, Minneapolis Federal Reserve President Neel Kashkari said on Tuesday. Investors are betting on more US interest rate hikes after last week’s payrolls data did nothing to challenge the outlook for monetary policy tightening by the US Federal Reserve.

Higher rates could dent demand for non-interest-paying gold.

“From a technical point of view, the area $1,300 now represents a support. If gold manages to remain above this level, markets could see this as a signal of strength from the buyers,” said ActivTrades chief analyst Carlo Alberto de Casa.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.35% to 831.91 tonnes on Tuesday from Monday, the biggest drop since 18 December 2017.

Spot palladium fell 0.4 to $1,096 an ounce on Wednesday, after hitting its life-time high on Tuesday at $1,111.40. Silver was down 0.1% at $16.93 an ounce. Platinum dropped 0.7% to $958.70 an ounce. Reuters