Gold Falls as US Yields Rise Offsetting Weak USD

Gold edged down on Wednesday, as the impact of higher U.S. real yields counteracted the effects of a weaker dollar, soft U.S. data and doubts that the Federal Reserve will raise interest rates at its June meeting.

Spot gold was down 0.1 percent at $1,191.38 an ounce by 1436 GMT, while U.S. gold futures for June delivery were unchanged at $1,189.20 an ounce.

Gold, which pays no interest, was under pressure from a two-month high in the benchmark 10-year U.S. Treasury yield .

“U.S. real yields, which correlate the most to the gold price, have risen,” Macquarie analyst Matthew Turner said.

“That’s what’s driving gold prices,” he said, adding that he expected the Fed to raise rates earlier than the market currently anticipates.

The dollar fell 0.5 percent against a basket of currencies, after data showed U.S. private employers added 169,000 jobs last month, the fewest since January 2014 and 40,000 short of expectations.

The sluggish jobs report added to the view that the Federal Reserve will not raise interest rates at a policy meeting in June, a factor that could boost demand for bullion.

“A weaker dollar is obviously a supportive factor,” Danske Bank senior analyst Jens Pedersen said.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza