Gold declined to a nine-month low; dollar and yields rise

Gold prices declined by more than 1% on Mach 9 to a nine-month low, as the greenback and U.S. Treasury yields kept boosting, prompting investors to dump the non-yielding metal.

Spot gold dipped by 1.1% and settled at $1,681.41 per ounce after reaching its lowest since June 5 at $1,676.10. Furthermore, U.S. gold futures fell by 1.2% to $1,678.

The U.S. dollar boosted to a three-month high, while the U.S. 10-year Treasury yield held close to a more than the one-year peak. It increased the opportunity cost of holding the non-interest-bearing metal.

According to the head of a commodity strategist at TD Securities, Bart Melek, we have an economy that is rebounding, and inflation is materializing. That means yields are likely to move higher. He added that the yellow metal could fall further towards $1,660.

Furthermore, U.S. Congressional approval of President Joe Biden’s $1.9 trillion coronavirus relief package, which would have boosted inflation expectations, failed to keep gold afloat.

According to analysts, U.S. Federal Reserve Chair Jerome Powell’s failure to address the recent rise in U.S. yields last week further pressured the yellow metal.

SPDR Gold Trust holdings decreased to a 10-month low

Senior market analyst at OANDA, Edward Moya, announced that in the near-term, the yellow metal could trade in a range of $1,650-$1,700, with a move below $1,650 likely to invite some selling pressure.

The yellow metal is widely considered a hedge against inflation that is likely to stem from a widespread stimulus. However, higher bond yields in 2021 have threatened that status as they translate into a higher opportunity cost of holding precious metal.

Furthermore, SPDR Gold Trust holdings, the world’s largest gold-backed exchange-traded fund, decreased to a 10-month low on Friday.

Among other precious metals, silver dropped by 0.2% and settled at $25.14 an ounce. Palladium declined by 1% and touched $2,314.82, while the platinum gained 1.2% to $1,143.42.