Gold price slips for second session on higher bond yields
New York (May 7) Gold extended losses into a second day on Thursday, as a steadier dollar and higher bond yields dented its investment appeal, while uncertainty over the timing of a U.S. rate rise also weighed.
Spot gold was down 0.4 percent to $1,186.23 an ounce by 1148 GMT, holding below the key $1,200 level for a fifth day. U.S. gold futures for June delivery dropped $4.70 to$1,185.50 an ounce.
"The fact that we've got this back-up in long-term real yields would suggest to me that the risk is still to the downside for gold," Deutsche Bank analyst Michael Lewis said.
"However, we probably want to see real yields going higher along with dollar strength to get gold out of the current trading range and lower."
Gold has been trading in a relatively narrow $80 an ounce trading range between $1,142 and $1,224 since mid-February, compared to a range of around $150 in January.
Bond yields in Europe and the United States have been rising as deflation fears ease on recovering oil prices and in anticipation of a interest rate increase by the U.S. Federal Reserve later this year.
As gold pays no interest, the rise in returns from U.S. bonds and other markets is seen as negative for the metal.
Germany's 10-year government bond yield hit a 2015 high on Wednesday, while the 10-year U.S. Treasury yield rose to its highest since early December.
Fed Chair Janet Yellen warned that low long-term U.S. interest rates could rise as the Fed normalises its policy, causing disruption across the financial system.
"Yellen's comments that bond yields could see a sharp jump continued to weigh on gold," ANZ said in a note.
Gold failed to capitalise on disappointing U.S. economic reports and lower European equities, raising concerns about possible further declines, traders said.
The dollar rebounded from lows hit after data on Wednesday showed U.S. private employers hired the fewest number of workers in more than a year in April.
Investors are focused on Friday's U.S. nonfarm payrolls for April in search for a clearer picture of the economy.
Strong data could prompt the Fed to soon hike rates, a move that could hurt demand for non-interest-paying gold.
Atlanta Fed bank president Dennis Lockhart said on Wednesday he still feels conditions would be in place for a midyear U.S. rate hike despite a weak start to 2015, and that markets betting on a September increase were in "reasonable alignment" with the central bank.
Silver fell 1 percent to $16.34 an ounce. Platinum dropped 0.8 percent to $1,131.00 an ounce, while palladium was unchanged at $789 an ounce.
Source: Reuters
