Gold headed for a weekly drop as investors weighed the outlook for yields and the economy with renewed concerns over the coronavirus.
Treasury yields steadied after briefly climbing to session highs on Thursday after a weak auction of 7-year notes echoed a disastrous sale last month that helped push yields higher. Appearing before the Senate Banking Committee on Wednesday, Federal Reserve Chairman Jerome Powell said the surge in yields reflected a brighter economic outlook as the vaccination roll-out accelerates and was not cause for concern.
President Joe Biden set a goal of administering 200 million vaccine doses by the end of April, doubling his target for his first 100 days in office. Still, virus cases in the US are rising again, reversing course after months of decline and threatening another setback in the return to normality.
Bullion has dropped about 9% this year amid optimism over a recovery from the pandemic, a resilient dollar, and the rise in bond yields. Still, easier policy may last for a while, helping to cushion gold’s fall. Powell said this week that the Fed would wait until the economy has “all but fully recovered” to pull back the extraordinary monetary support it rolled out in response to the health crisis.
“Continuous strengthening in the US dollar alongside reflation optimism are likely to weigh on gold prices, which remains in a downward trend,” said Margaret Yang, a strategist at DailyFX in Singapore. “Next week’s nonfarm payrolls data will be critical to have a sense of job market developments and its ramification on future interest rate path.”
Spot gold fell 0.1% to $1 724.52 an ounce by 12:02 p.m. in Singapore, and is down 1.2% this week to snap two straight weeks of gains. Silver was steady, while palladium and platinum rose. The Bloomberg Dollar Spot Index ticked lower, paring a weekly advance.
“The risk at the start of the second quarter is that we can get a temporary wobble in stocks and oil, which is starting to happen already,” said Shyam Devani, chief strategist at SAV Markets in Singapore. “This could lead to a continued pop on the US dollar and subsequently a dip in gold.”
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