PRECIOUS-Gold slumps to 9-month trough as yields, dollar erode appeal

* U.S. 10-year yields hold near one-year peak

* U.S. dollar hits 3-month peak

* SPDR gold holdings fell to 10-month low on Friday

By Nakul Iyer

March 8 (Reuters) – Gold prices slid 1% on Monday to a nine month-low, as the dollar and U.S. treasury yields continued their march higher and prompted investors to dump the non-yielding metal.

Spot gold fell 0.7% to $1,689.87 per ounce by 1523 GMT, after hitting its lowest since June 8 at $1,683.68 earlier. U.S. GCv1 declined 0.9% to $1,683.50.

The dollar climbed to a three-month peak, while the held close to a more than one-year high, increasing the opportunity cost of holding gold, which pays no interest. US/ USD/

“We have an economy that is recovering and inflation is materializing; that ultimately means that yields have room to move higher,” said Bart Melek, head of commodity strategies at TD Securities, adding that gold could fall further towards $1,660 as a result.

U.S. Congressional approval of President Joe Biden’s $1.9 trillion COVID-19 relief plan also failed to keep the metal afloat. gold is considered a hedge against inflation likely stemming from widespread stimulus, higher bond yields this year have threatened that status because they translate into a higher opportunity cost of holding bullion.

Analysts also said that U.S. Federal Reserve Chair Jerome Powell’s failure to address the recent surge in U.S. yields last week further pressured gold.

Though markets haven’t got much pushback from the Fed on yields, few doubt that the Fed isn’t going to act eventually and with rate hikes unlikely this year, that should provide support for gold, said Edward Moya, senior market analyst at OANDA.

Moya added that in the near-term gold could trade between $1,650 and $1,700, with a move below $1,650 likely inviting some further selling pressure.

Reflective of sentiment, holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust , fell to a 10-month low on Friday. GOL/ETF

rose 0.6% to $25.33 an ounce on Monday. Palladium fell 0.5% to $2,326.26, while platinum gained 1.8% to $1,149.98.



Source link