Gold steadies on surge in the dollar and higher US bond yields
London — Gold steadied on Wednesday after a surge in the dollar and US bond yields in the previous session had pushed prices down 1.7% to their lowest this year.
Tuesday’s fall was the biggest since November 2016. Gold crashed below its technically important 200-day moving average and the psychologically significant $1,300 mark to $1,288.31, the weakest since December 28.
"Rising US bond yields and a stronger dollar were factors behind gold’s decline below the $1,300 level, said National Australia Bank economist John Sharma. "The slight pick up [on Wednesday] suggests there might have been some opportunistic buying on the part of investors."
Spot gold was up 0.1% at $1,290.86 an ounce at 11.04am GMT, while US gold futures for June delivery were flat at $1,290.30.
A stronger dollar hurts gold by making it more expensive for holders of other currencies, while higher bond yields make non-yielding bullion less attractive to investors. The dollar rose further on Wednesday to a new 2018 high, while yields on 10-year US treasuries slipped back from a seven-year peak.
Yields and the dollar are likely to rise further, pushing gold to $1,275 by the end of June and $1,250 by year end, below the $1,310 to $1,360 range it has inhabited since January, said ABN AMRO analyst Georgette Boele. "Gold held up for so long on such a high level. Now you are below $1,300 and the 200-day moving average, people who hold long positions are a little bit nervous."
Technical and momentum indicators suggested gold could fall to about $1,278, said analysts at ScotiaMocatta. Fibonacci support for the metal was at $1,287, they said.
Investors largely disregarded news that North Korea had called off high level talks with South Korea due on Wednesday, less than a month before a planned summit between Kim Jong-un and US President Donald Trump. "There are lot of geopolitical risks but people are just used to it. Therefore it has not become a big driver for gold," said Argonaut Securities analyst Helen Lau.
In other precious metals, silver was up 0.2% at $16.26 an ounce after falling 1.6% on Tuesday. Platinum was 0.3% higher $895.70 an ounce and palladium lost 0.2% to $980.72 an ounce.