Gold Extends Losses on Firm Dollar and Soaring Treasury Yields

Gold prices

Gold prices fell for the fifth consecutive time today and stayed close to a two-week low on rising U.S. Treasury yields and a stronger dollar. The higher inflation rates boosted the yellow metal, but it also lifted government bond yields. Treasury yields gained more than 1.3%, their highest since late February 2020, which raised the opportunity cost of owning non-interest-bearing assets such as the bullion. Meanwhile, the greenback recovered from a three-low low and made gold more expensive for investors using other rival currencies.

Spot gold is currently trading at $1,786.36 per ounce as of 0827 GMT.

Margaret Yang, a strategist at DailyFx, noted that bullion prices are likely to be under pressure in the near-term as investors focus on the rising dollar and Treasury yields. They are hesitant to do bargain hunting due to the impending U.S. fiscal stimulus package and the possibility for the anticipated reflation to push yields further up, she said. But Avtar Sandu, the senior commodities manager at Phillip Futures, argued that some investors might consider deep price corrections due to short-term fluctuations as buying opportunities.

In a televised town hall yesterday, U.S. President Joe Biden pushed his $1.9 trillion coronavirus relief plan and vowed to accelerate the COVID-19 vaccination program. He wants to dole out the $1,400 stimulus and bolster unemployment benefits in the coming weeks. Biden also expects every American to get vaccinated by the end of July.

On COVID-19 vaccine, Moderna Inc. clarified that the delivery of some of its vaccine doses to the U.S. was slightly delayed because of a minor problem in the final stages of production at its contractor Catalent Inc. The biotech firm assured that the delays will be resolved soon and will not affect its monthly delivery targets. It plans to deliver 300 million doses to the U.S. by the end of July instead of September. Catalent also said that they are meeting all of their vaccine production commitments.

Market participants will be monitoring the release of the minutes of the Federal Reserve’s latest monetary policy due today at 1900 GMT. Yang said that a dovish statement from the Fed would be supportive of gold, but a neutral tone will have an insignificant impact.

In a related development, gold mutual funds and ETFs reported three-month high investment outflows in the week that ended on February 10. Investors shifted their attention away from the bullion and into high-yielding bonds and soaring equities.