Gold prices extended their losses on Monday as the dollar rallied to two-decade highs while US Treasury yields also advanced, curbing investors’ enthusiasm for the safe haven metal.
Coming off a run of three straight weekly losses, spot gold declined another 1.0% to $1,863.96 per ounce by 12:25 p.m. ET Monday. US gold futures, too, dropped 1.0% in New York, trading at $1,862.60 per ounce.
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Bullion has been sliding since mid-April as the Federal Reserve and other central banks tighten policy to fight rising consumer prices. The monetary squeeze has sent yields on US government bonds past 3% and fueled five weeks of gains for the dollar, making the non-interest-bearing gold less attractive.
Still, there could be more bond market swings to come as a swathe of inflation data feeds the debate on price pressures and monetary policy. US consumer prices are set to be released on Wednesday, with China, India, Mexico and Brazil also reporting during the week.
Investors also digested trade data from China Monday that showed the damage caused by covid-19 lockdowns in the world’s second-biggest economy. The nation’s exports and imports struggled in April as worsening virus outbreaks cut demand, undermined production and disrupted logistics.
“Persistent strength in the US dollar and higher bond yields amid expectations that the Fed may continue with aggressive rate hikes to get inflation under control is weighing on gold,” Ravindra Rao, the head of commodity research at Kotak Securities Ltd., wrote in a Bloomberg note.
The downside is limited on increasing concerns relating to China, inflationary worries and tensions over Russia’s invasion of Ukraine, he said.
Investors are beginning to cut back their exposure to gold after a long period of expansion, with exchange-traded fund holdings falling for a second straight week. Hedge funds trading the Comex also cut their net bullish bets to three-month low as of last Tuesday, Bloomberg data shows.
(With files from Bloomberg)