Gold drops amid a stronger dollar and rising treasury yields

Bengaluru — Gold prices fell on Wednesday to their lowest in more than a week, as elevated dollar and treasury yields weighed on demand for bullion.

Spot gold was down 0.3% at $1,944.06/oz, at 4.30am GMT, after hitting its lowest since April 11. US gold futures fell 0.7% to $1,944.80. On Tuesday, prices had fallen up to 1.8% as a stronger dollar and rising treasury yields overshadowed safe-haven inflows into the metal.

“With the US dollar still firm today, and with China declining to lower its one- and five-year loan prime rates, it looks like the long squeeze [in gold] is continuing in Asia,” said Oanda senior analyst Jeffrey Halley.

The dollar held near recent highs, making greenback-priced gold less attractive for other currency holders. China kept its benchmark lending rates for corporate and household loans steady at its April fixing, defying expectations, as Beijing has become more cautious in introducing easing measures to aid a slowing economy.

US treasury yields continued to surge to multiyear highs, as investors prepared for the Federal Reserve to aggressively raise rates. Gold is highly sensitive to rising US interest rates and higher yields, which increase the opportunity cost of holding non-yielding bullion.

While recent gains show Ukraine is still a key focus, the move overnight is about rebalancing fast money flows, and not a structural change in gold’s outlook, Halley said, adding that a sustained rise by US 10-year yields through 3.0% could change that outlook.

On Monday, gold prices came within touching distance of the key $2,000/oz level as the deteriorating Ukraine crisis and mounting inflation worries drove investors to the safety of gold.

Spot silver dipped 0.4% to $25.05/oz, and platinum eased 1.4% to $976.64, while palladium gained 0.9% to $2,394.05.

Reuters