Gold Retreats as Yields and Dollar Recover

Gold prices fell to their lowest since April 20 on higher yields and a stronger dollar. Benchmark U.S. 10-year Treasury yields climbed to their highest since April and raised the opportunity cost of owning the yellow metal. Meanwhile, the dollar index rose 0.1% and made the bullion more expensive for investors and traders using rival currencies.

Spot gold is currently trading at $1,769.38 per ounce as of 0828 GMT.

A Reuters survey showed that gold traders and analysts lowered their forecast for gold prices. Many of them believe that the economic recovery makes it impossible for the precious metal to return to record highs last year. Their median forecast for gold prices is $1,784 per ounce in 2021 and $1,743 in 2022. The respondents cited the rising yields as the main factor that is hurting gold right now. But they believe that the bullion demand could recover if the dollar weakens or there is another surge in COVID-19 infections.

Another headwind for gold is the jump in U.S. consumer confidence. The index leaped to 121.7 in April, the highest since February 2020.  The future expectations index also climbed to 108.3, the highest reading in almost two years. Analysts attributed the consumers’ optimism to the increased vaccination, the reopening of more businesses and an employment surge that eased pandemic-related anxieties.

Still, another factor that weighs on the bullion is the increase in retail sales in Japan. Government data showed that retail sales soared 5.2% in March compared to the same period last year. It is also the first positive growth in four months and the biggest gain since October 2020.

IG Market analyst Kyle Rodda noted that higher commodity prices and positive consumer data in the U.S. are pulling gold prices down. He predicted that market participants would be looking for signs if the Federal Reserve will change its loose monetary policy. The Feds will release a policy statement later today.

Meanwhile, U.S. officials reassured their support for India in dealing with their COVID-19 emergency. The second most populous country in the world has become the new epicenter of the coronavirus pandemic. In a recent phone call, President Joe Biden told Prime Minister Narendra Modi to tell him what they need, and the U.S. will do it.