Gold price up 1 percent on weaker dollar, shares; eyes on bond yields
London (May 12) Gold rose up to one percent on Tuesday as the dollar and European shares suffered from a sell-off in global bond markets, although higher real yields kept prices under $1,200 an ounce.
Spot gold rose to a session high of $1,196.60 an ounce and was trading up 0.9 percent at $1,194.10 by 1131 GMT, while U.S. gold futures for June delivery were up $10.50 at $1,193.50 an ounce.
The dollar index, which measures the U.S. currency against a basket of major peers, fell 0.6 percent.
U.S. 10-year yields, which have been driven higher in recent weeks by higher German Bunds, rose to a six-month high above 2.3 percent.
Returns from U.S. bonds are closely watched by the gold market, given that the metal pays no interest, and higher yields increase the opportunity costs of holding the metal.
"Normally you have these co-movements between the dollar and yields but the unusual situation of higher yields and lower dollar is having an impact on gold," Julius Baer analyst Carsten Menke said.
"You have Greece and also uncertainty about when the Fed is going to hike rates that support prices. Overall, however, it feels as none of these factors is going to have a material medium-to-longer term effect on gold."
Gold was helped by a sharp decline in European shares, as it is usually seen as an hedge against risk.
Investors were also looking at Greece, as euro zone finance ministers, who met on Monday, acknowledged progress in talks between Greece and its creditors but said more work was needed to close a cash-for-reforms deal.
Concerns grew that the debt-burdened country could run out of cash, although it calmed immediate fears of a default on Monday by making a 750-million-euro ($837-million) payment to the International Monetary Fund a day early.
Friday's U.S. non-farm payrolls data for April, which tempered views that a U.S. rate rise could come at the Federal Reserve's next policy meeting in June, prompted some demand for gold.
As a gauge of investor sentiment, holdings in SPDR Gold Trust, the top gold-backed exchange-traded fund, saw the sharpest decline this year on Friday.
Silver rose 1.1 percent to $16.47 an ounce. Platinum rose 1 percent to $1,132.74 an ounce, while palladium gained 1.2 percent to $785 an ounce.
Source: Reuters
