Gold price pares weekly drop as dollar weakens, yields retreat

A firmer dollar and rising yields pressuring gold are one side of the coin. (Stock image)

Gold prices edged up slightly on Friday, paring a weekly loss as the dollar slipped against most G10 currencies, while bond yields retreated from session highs after the latest US spending data showed declines in February.

Spot gold turned 0.2% higher at $1,731.75 an ounce by 2:30 p.m. EST, while US gold futures gained 0.3% to $1,729.50 an ounce. However, gold is still heading for its first weekly loss in three, underscoring its fitful comeback from a nine-month low.

Optimism over a recovery from the pandemic, a resilient dollar and a rise in bond rates that reduce the appeal of non-interest-bearing bullion continue to thwart a sustained rebound in the haven metal.

“Gold prices remain in limbo despite recent weakness in real yields, highlighting the change in regime from an inflation-hedge product into a safe-haven asset today,” TD Securities analysts led by Bart Melek said in a Bloomberg note. “This continues to place a wet blanket on the prospects of increasing investment flows.”

“Dips are being bought and rallies are being sold into (in the gold market) … there are clearly two definitive sides of a coin and this is the main focal point,” David Meger, director of metals trading at High Ridge Futures, told Reuters.

“A firmer dollar and rising yields pressuring gold are one side of the coin and rising coronavirus cases and the Fed’s low-interest rate policy lifting it are another,” Meger added, noting it remains unclear which side will ultimately prevail.

“But, beyond the near term, the macro backdrop is set to remain supportive of gold as the dollar weakening trend resumes and we expect real yields to remain negative,” Standard Chartered analyst Suki Cooper said in a note.

(With files from Bloomberg and Reuters)