Bengaluru (Reuters): Gold shed 1 per cent on Monday as a recovery in share markets and rising US Treasury yields reduced some of the metal’s safe-haven appeal, prompting investors to book profits. Spot gold was down 0.9 per cent at $1,499.50 per ounce in morning trade, while US gold futures slipped 0.9 per cent to $1,510.30.
“The rally in bond markets seems to have paused at least for now and we’ve seen some additional gains in stocks over the weekend, so a bit of a more optimistic start to the week is helping to attract profit-taking in gold,” Saxo Bank commodity strategist Ole Hansen said.
“However, gold is holding above the $1,500 level and key support level around $1,480-$1,485 area. But with bond yields moving up a notch, there isn’t much room for gold buyers.”
Benchmark US Treasury yields gained on Monday, moving further away from record lows after the closely-watched US yield curve between two- and 10-year bonds inverted for the first time since 2007 on Wednesday last (August 14).
Stocks make gains and taking pressure off gold
Equity markets around the world rose, with European markets rising for a second session, as investors cheered signs of moves by Germany and China to counter slowing growth. Markets are awaiting the US Federal Reserve’s Jackson Hole symposium this week for greater clarity on the future path of interest rates. Traders saw an 83.7 per cent chance of a 25 basis-point cut in September.
“Given the policy uncertainties that may or may not unfold later in the week from Jackson Hole, gold could consolidate with a downward bias before eventually resuming its upward momentum,” Stephen Innes, managing partner, VM Markets, said.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.