PRECIOUS-Gold eases as buoyant dollar offsets slide in yields
* Dollar hits three-month peak against rivals
* Silver slips to over 3-month low, platinum sheds over 3%
* U.S. 10-year Treasury yield hits lowest since February
* Stagflationary environment could help gold, analyst says (Updates prices, adds graphic)
July 19 (Reuters) – Gold inched lower in choppy trading on Monday, as a buoyant dollar offset a slump in Treasury yields to their lowest levels since February.
Spot gold shed 0.2% to $1,807.59 per ounce by 11:06 a.m. EDT (1806 GMT). U.S. gold futures settled 0.3% lower at $1,809.20.
“Gold is caught in a tug-of-war between a rising dollar that weighs down on the precious metal and a drop in risk appetite, which supports its price,” said Ricardo Evangelista, a senior analyst at ActivTrades.
The dollar index hit a more than three-month high, making gold more expensive for other currency holders, and countering the sharp fall in U.S. benchmark Treasury yields.
Jeffrey Christian, managing partner at CPM Group, also attributed gold’s recent declines to seasonal weakness in investment and jewellery demand.
“A lot of investors are looking at gold and saying gold spiked to a record high in early August last year and it hasn’t come close to regaining the high since then, so there is what we call stale bull liquidation.”
Sentiment in riskier markets was bruised by investors’ fears over a relentless surge in coronavirus cases, which forced many Asian countries into imposing lockdowns, and growing inflationary pressures.
Reflective of sentiment, holdings of the largest gold-backed exchange traded fund (ETF), New York’s SPDR Gold Trust dropped to a two-month trough on Friday.
“Stagflation could become a really interesting element if we keep seeing slowing economic growth coupled with some inflationary fears,” said Jim Wyckoff, senior analyst with Kitco Metals.
“Theoretically, stagflation should be bullish for gold because you’ve got rising inflation, which suggests investors are going to look at hard assets including gold and slowing economic growth, which might put in a safe-haven bid.”
Silver retreated 2.3% to $25.07 after hitting its lowest since April 13 at $24.96. Platinum shed 3% to $1,069.49 and palladium fell 1.4% to $2,593.00.
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