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A rise in the dollar and government bond yields on Monday were combining to dim appetite for bullion, holding prices near their lowest levels since early June, FactSet data show.
The drop in the precious metal at the start of the second week in March comes even as a $1.9 trillion COVID-19 relief bill is set to be voted on by the House as early as Tuesday after the Senate narrowly approved the aid package over the weekend with concessions to accommodate centrist Democrats.
The fiscal package was expected to be a boost for gold because it means additional government spending, making safe-haven metals a more compelling investment; however, the prospects of a brighter economic outlook domestically and outside the U.S. may be weighing on near-term gold demand.
The backdrop of 10-year Treasury yields TMUBMUSD10Y, 1.590%, trading at around 1.6%, and a firmer U.S. dollar, up around its highest since November, as gauged by the ICE U.S. Dollar Index DXY, +0.28%, was generating a one-two punch for precious metals, metals dealers said.
Richer bond yields and a stronger U.S. currency, which many commodities are priced in, can make bullion comparatively less attractive to own for those buying overseas.
“Gold remains bid below the $1,700 mark, yet the prospects of a further rise in U.S. yields will likely dampen the bulls’ appetite in gold and keep the short-tern tendency skewed to the downside,” wrote Ipek Ozkardeskaya, senior analyst, at Swissquote in a recent note.
At last check, gold for April delivery on Comex GC00, -0.55% GCJ21, -0.55% was trading $10.30, or 0.6%, lower at $1,688.20 an ounce, with prices trading for the most-active contract ended at their lowest since June 5.
Prices for gold last week booked a 1,8% weekly decline.
May silver SI00, -0.26% SIK21, -0.26% was giving up 12 cents, or 0.5%, to trade at $25.17 an ounce, following a 4.5% weekly skid.
