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Gold Falls After Two Weekly Gains as Traders Await Bond Auctions

Bloomberg logoBloomberg 3/22/2021 Eddie Spence and Yvonne Yue Li

(Bloomberg) -- Gold declined amid concern that Treasury yields may rise further as investors brace for key U.S. bond auctions.

The drop comes after the precious metal posted two weekly increases that brought hope to bulls that this year’s selloff was easing. Gold is down more than 8% this year amid pressure from rising bond rates, which make non-interest-bearing bullion less attractive.

Traders looked past a decline in yields on Monday to the longer-term view as the market turns attention to the heavy slate of auctions, with bonds getting pummeled recently amid a brightening outlook for growth and inflation. Gains in gold over the past two weeks weren’t enough to spur traders to close out bets on falling prices, according to TD Securities analysts led by Bart Melek.

“This suggests that money managers continue to sell the yellow metal, as the sustained rise in nominal yields continues to add pressure,” the analysts said in a note Monday.

chart, line chart: Gold falls amid resilient dollar, bond yields near highest in more than a year © Bloomberg Gold falls amid resilient dollar, bond yields near highest in more than a year

The U.S. economy is set for a strong 2021 as the pandemic recedes that will push up prices, but there’s no sign yet that this will deliver unwanted inflation or a need to adjust monetary policy, said Federal Reserve Bank of Richmond President Thomas Barkin.

Fed Chair Jerome Powell and Treasury Secretary Janet Yellen are expected to appear before the U.S. House Financial Services committee on Tuesday.

Spot gold fell 0.3% to $1,740.24 an ounce by 2:19 p.m. in New York, after rising 0.5% on Friday. Futures for June delivery on the Comex fell 0.2% to settle at $1,740.40 an ounce. Spot silver fell 1.9%, while platinum and palladium retreated.

StoneX analyst Rhona O’Connell sees the metal edging higher on “improving physical demand and masses of liquidity looking for a home.”

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