Gold set for second monthly dip as high U.S. yields erode appeal

Silver set for first monthly fall in three

  
Image used for illustrative purpose. Ingots On Wooden Table.

Image used for illustrative purpose. Ingots On Wooden Table.

Gettyimages

Gold fell on Friday and was headed for its second straight monthly decline, as U.S. Treasury yields held near a more than one-year high, eroding bullion's safe haven status.

Spot gold fell 0.4% to $1,762.44 per ounce by 1321 GMT, having earlier touched its lowest since June 2020 at $1,754.70.

U.S. gold futures dropped 0.9% to $1,760.00.

"The main factor weighing on gold is the surge in bond yields, which makes gold less attractive because it doesn't pay any interest," said Commerzbank analyst Carsten Fritsch.

Bullion had dropped 1.9% on Thursday and was down about 4.5% for the month.

The benchmark U.S. 10-year Treasury yields on Friday were hovering near an over one-year high scaled in the previous session.

While gold often benefits from expectations for more stimulus measures, given its status as an inflation hedge, government debt has turned out to be a more attractive bet for investors of late since bullion does not pay any fixed interest.

"Gold fell out of favour of investors, a clear sign you can see from continued outflows in gold exchange-traded funds (ETFs)," Fritsch said.

Holdings in the world's largest gold-backed ETF, SPDR Gold Trust GLD , fell 0.6% on Thursday to its lowest since May 2020. 

"Bullion has failed to hold $1,800 and has now broken the support at $1,775, opening space for further declines," ActivTrades chief analyst Carlo Alberto De Casa said in a note.

"A strong greenback could be detrimental for gold as investors are switching back to bonds in the search for yields." 

Silver slipped 2.2% to $26.80 an ounce and was poised for its first monthly decline in three, down 0.7% so far.

Palladium declined 2.4% at $2,343.11, while platinum fell 2% to $1,191.60.

However, both the auto-catalyst metals were set to register their best month since November.

(Reporting by K. Sathya Narayanan and Sumita Layek in Bengaluru; Editing by Shinjini Ganguli and Amy Caren Daniel) ((Sathya.Narayanan@thomsonreuters.com; within U.S. +1 646 223 8780, outside U.S. +91 80 6182 2732; Reuters Messaging: sathya.narayanan.thomsonreuters.com@reuters.net))

More From Commodities