Gold suffers more knocks as dollar, treasury yields strengthen

Onome Amuge

Gold, which has over the past few weeks lost clarity on direction, extended its losses on Tuesday as it stumbled to its lowest level since March 8.  The sharp decline in the yellow metal occured after the US dollar and the US Treasury yields rose to their highest levels. The US Dollar Index soared to its highest in nearly five months while the treasury yields climbed to its highest since January 2020 at 1.77 per cent, adding more dents on gold’s investment hopes.

Spot gold shed 0.3 per cent to $1,679.41, losing above 3 per cent of its value so far this month while US gold futures fell 0.4 per cent to $1,679.10 per ounce.

Christopher Lewis, a gold dealer and price analyst noted that gold has been struggling a bit in recent trading sessions and has no real direction at the moment.

“Higher yields in the bond market is ugly for gold, as it is easier to clip coupons in the bond market than it is to pay for storage for gold. The higher yields go, the less attractive gold is.” he continued.

Commenting on gold’s outlook, Ole Hansen, chief commodity strategist, Saxo Bank noted that the yellow metal is currently stuck in ‘no man’s land’ and despite having seen a slight improvement in the technical outlook, its future remains uncertain.

“For that to change and in order to attract renewed investor demand, prices need to touch $1,765 per ounce and until it does, we maintain a short-term neutral outlook,” he stated.

On his part, Howie Lee, an economist at OCBC bank raised optimism that the amount of stimulus coming on in the U.S could likely drive inflation expectations higher which should be positive for gold. He however cautioned that such a situation could also drive yields higher and also boster sentiment, which is negative for gold.