Gold Heads for Weekly Decline as Investors Weigh Yield Outlook
New York (Mar 26) Gold headed for a weekly drop even as bond yields halted their advance, under pressure from a dollar strengthening on the success of the U.S. vaccine program.
Treasury yields are set to post their first weekly loss since January after a slate of bond auctions passed without a repeat of the disaster that caused a spike last month. That’s eased the pressure on gold, though a dollar that’s strengthened on U.S. vaccine success has hurt the metal this week.
On Friday, gold steadied as the dollar trimmed its weekly gain, while risk sentiment improved and European equities advanced.
Bullion has dropped about 9% this year amid optimism over a recovery from the pandemic, a resilient dollar, and the rise in bond yields. Still, easier monetary policy may last for a while, helping kindle higher inflation. Even that may not help gold though, according to Carsten Menke, an analyst at Julius Baer Group Ltd.
“While there will be higher inflation in the US, it is important to keep in mind that this is first a reflection of the strong growth backdrop and, second, unlikely to last,” Menke wrote in a note. “It is not the kind of inflation that will lift safe-haven demand and lead to lastingly higher gold and silver prices.”
Spot gold was little changed at $1,726.84 an ounce by 10:49 a.m. in London, and is on track for a 1.1% fall this week, snapping two straight weeks of gains. Silver, palladium and platinum rose. The Bloomberg Dollar Spot Index declined 0.2%.
“The risk at the start of the second quarter is that we can get a temporary wobble in stocks and oil, which is starting to happen already,” said Shyam Devani, chief strategist at SAV Markets in Singapore. “This could lead to a continued pop on the U. S. dollar and subsequently a dip in gold.”
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