Gold prices fell on Monday as the U.S. dollar recovered. The greenback rose 0.1% and made the yellow metal more expensive for investors and traders using rival currencies. But the bullion’s losses were capped by a decline in U.S. Treasury yields, which dropped below 1.6%. It lowered the opportunity cost of owning the non-interest-bearing metal. Another tailwind for gold is the possibility of a prolonged low-interest-rate environment. Lower interest rates weigh on the dollar and yield, and boost gold’s appeal.
Spot gold is currently trading at $1,883.71 per ounce as of 0701 GMT.
OANDA senior market analyst Jeffrey Halley said that despite price correction in previous sessions, gold fundamentals remain bullish. The main driver for bullion price movement is a sharp increase in U.S. bond yields, he added.
The U.S. Labor Department reported that nonfarm payrolls increased by only 559,000 jobs in May. It is higher than the 278,000 in April but lower than the economists’ forecast of 650,000 jobs. Though it was bad news, the weaker-than-expected job growth eased investors’ concerns about the tightening of the Federal Reserve’s monetary policy. Some groups blame the $300 weekly unemployment subsidy for discouraging people to return to work. Republican governors in 25 states have started terminating this benefit and other federal unemployment programs.
Meanwhile, Energy Secretary Jennifer Granholm announced that the Democrats are already preparing an infrastructure bill for a vote in the House of Representatives, with or without Republican support. Transportation Secretary Pete Buttigieg explained that the latest offer from the Republicans did not meet President Joe Biden’s objectives.
In physical trading, Indian dealers offered discounts of as much as $12 per ounce last week. It is the highest since mid-September 2020. COVID-19 restrictions continue to dampen gold demand. The second-largest gold consumer recorded more than 2,500 daily deaths and a total of more than 28 million infections. In China, the bullion was offered at discounts of up to $20-$50 per ounce. The resurgence of coronavirus cases and new regulations dented the demand for the yellow metal. The Chinese central bank issued a revised anti-money laundering law that covers precious metal exchanges.
In a related development, the holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, increased by 0.1% on Friday to 1,043.16 tons. The U.S. Commodity Futures Trading Commission reported that market speculators raised their net long positions in COMEX gold futures to 129,846 lots for the week that ended on June 1.