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LONDON: Gold hit a two-week low on Monday, as investors piled into the dollar with US Treasury yields approaching 3% and geopolitical upheavals eased.
The yield on 10-year US Treasuries hit its highest since January 2014, lifting the dollar index to a seven-week peak and making dollar-priced gold most costly holders of other currencies.
“If we break above (3%) it will be first time in 5 years this has happened and this increases opportunity cost of holding (non-yielding) gold,” said Mitsubishi analyst Jonathan Butler.
But he said the reason yields were rallying was because interest rates were expected to climb due to rising inflation. “If inflation is rising, gold provides a hedge,” he said.
Spot gold was down 0.5% at $1,327.93 per ounce at 1005 GMT, after earlier touching its lowest since April 9 at $1,326.91. US gold futures fell 0.6% to $1,329.80 per ounce.
Gold, seen as a safe haven in times of political turmoil, was also under pressure after North Korea said at the weekend it would suspend nuclear and missile tests before planned summits with South Korea and the United States.
Added to this were signs that US China relations might be thawing. But easing world stocks limited gold’s losses, as investors awaited earnings from global tech firms and US bond yields approached peaks that hurt risk appetite in the past. Gold often trades counter to equities, which are seen as risky assets.
A trader in Hong Kong said gold prices were also underpinned by the arbitrage in Asia. Speculators raised their net long or buy positions in COMEX gold by 5,382 contracts to 143,594 contracts in the week to April 17, US Commodity Futures Trading Commission data showed on Friday.
Spot gold may test support at $1,326 per ounce, following its failure to break resistance at $1,354, Reuters technical analyst Wang Tao said.
Among other precious metals, spot silver fell 1% to $16.94 per ounce. Platinum was down 0.1% at $921.80 an ounce, having hit a two-week low of $914.50, while palladium dropped 1.4% to $1,016 an ounce.