VIR Stock – PRECIOUS-Firm U.S. yields keep gold under pressure
* Gold to struggle until Fed curbs higher yields – analyst
* Fed officials emphasise on easy policy as outlook improves
* U.S. Senate to begin debate on $1.9 trillion aid this week
(Adds comments, details, updates prices)
By Sumita Layek
March 3 (Reuters) – Gold prices fell on Wednesday for a
sixth session in seven, as expectations that U.S. Treasury
yields would move higher on further economic stimulus kept
non-yielding bullion under pressure.
Spot gold eased 0.2% to $1,734.26 per ounce by 0320
GMT, having dropped to its lowest since June 15 at $1,706.70 on
Tuesday. U.S. gold futures dipped 0.1% to $1,732.
“There’s a clear trend for gold to the downside, and as long
as fiscal stimulus keeps getting pumped into the U.S. economy
and the Federal Reserve remains reticent about doing something
to quash yields, gold prices will struggle,” said IG Market
analyst Kyle Rodda.
Investors kept a close eye on the progress of the $1.9
trillion U.S. stimulus bill as the Senate starts debate over the
legislation this week.
Benchmark U.S. Treasury yields have held near 1.4% levels
despite coming down from a one-year high reached last week.
While gold is viewed as a hedge against inflation, higher
yields have of late threatened that status, since they increase
the opportunity cost of holding bullion, which pays no interest.
Prices can receive a reprieve if “the Fed comes out and says
that it’ll control yields or we get an outbreak in inflation
expectations that implies that it’s going to move out of the
Fed’s control,” Rodda said, adding that until then it’s “the
worst of all worlds for gold.”
Analysts say higher yields can force the Fed to tighten
monetary conditions sooner than anticipated, which is negative
Fed officials, however, maintain that they will keep their
easy money plans in place even in the face of a potential bout
of inflation this spring in an economy boosted by vaccines and
Silver dipped 0.1% to $26.73 an ounce, while
palladium climbed 0.4% to $2,372.40. Platinum shed
0.7% to $1,196.15.
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