Gold Buckles Under Firmer Dollar And Yields, U.S. Jobs Data In Focus

Gold fell 1.5%, sliding below the key $1,900 technical level on Friday as the dollar and Treasury yields picked up steam, ahead of the U.S. nonfarm payroll data that could give further clues on economic health.

Spot gold fell 1.1% to $1,892.11 per ounce by 1026 GMT and is down 0.3% for the week. U.S. gold futures shed 1% to $1,894.40.

“We can only see the dollar gaining from here followed by the yields, which are rising because markets are anticipating interest rates to go up on economic recovery prospects,” said Kunal Shah, head of research at Nirmal Bang Commodities in Mumbai.

The benchmark 10-year bond yield hit a fresh high since March, helping the dollar scale an over one-week peak. [USD/][US/]

Higher bond yields increase the opportunity cost of holding non-interest yielding bullion.

There’s been some “big selling activity from the (gold) futures market” and “someone seems to be wanting to reduce positions ahead of the U.S. non farm payrolls,” due at 1330 GMT, said UBS analyst Giovanni Staunovo.

Democrats’ control of the U.S. Senate has fuelled hopes of large stimulus measures, underpinning gold’s appeal as an inflation hedge.

But higher inflation bets and bond yields have also bolstered Federal Reserve officials’ hopes that their new monetary policy approach is taking hold.

“Gold still harbours the potential to reclaim the $2,000 handle. (But) there appears to be a risk of a pullback in the Fed’s asset purchasing programme should a U.S. economic outperformance crystallize in the latter part of the year,” said FXTM market analyst Han Tan.

“Another massive yields spike may then trigger further unwinding of gold’s recent gains.”

Silver fell 2% to $26.56 per ounce, but was on track for a fourth straight week of gains.

Palladium eased 0.3% to $2,413.56 per ounce, set for its worst week since early December.

Platinum dipped 0.9% to $1,106.35 per ounce, but was up more than 3% for the week.

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