Gold Prices Fall Eight Dollars As US Bonds Rise Sharply

Gold Illustration (Photo: Pixabay)

JAKARTA - Gold futures fell on Friday (Saturday morning of Indonesian Time), pressured by US Treasury yields, which rose sharply to new highs, but posted weekly gains as fears over the war in Ukraine and rising prices boosted its appeal as a safe haven and inflation hedge.

The most active gold contract for April delivery on the Comex division of the New York Exchange, fell 8.0 dollars, or 0.41 percent, to close at 1.954.20 dollars an ounce. But for this week, gold futures contract rose 24.90 US dollars or 1.3 percent.

The day before, Thursday, March 24, gold futures jumped 24.9 dollars, or 1.29 percent, to 1.962.20 dollars, after rising 15.8 dollars, or 0.82 percent, to 1.937.30 dollars on Wednesday, March 23, and slipped 8 dollars, or 0.41 percent, to 1.921.50 dollars on Tuesday, March 22.

Aided by expectations of monetary tightening by the US Federal Reserve, the 10-year US Treasury bond yield strengthened to near multi-year highs, increasing the chances of a loss for holding zero-yielding gold.

"If interest rates continue to rise rapidly, that could limit the precious metal's gains," said Chris Gaffney, president of global markets at TIAA Bank.

"However, the overall market tone is still supportive of the precious metal. There is safe-haven buying as well as an inflation hedge on the retail side. We see clients coming in wanting to add diversification of gold to their portfolios," Gaffney said as quoted by ANTARA.

The Fed raised borrowing costs for the first time in three years last week, and traders expected a 50 basis point rate hike during the Fed's policy meeting in May.

Gold, seen as a safe investment during times of political and financial uncertainty, has gained about 1.3 percent this week as investors try to shelter from the effects of the war in Ukraine and higher oil prices that threaten global growth.

"Don't be surprised to see some safe-haven buying and bargain buying," said Jim Wyckoff, senior analyst at Kitco Metals in a note.

Traders have also been watching developments in the Russia-Ukraine conflict and assessing the most hawkish comments from Federal Reserve officials this week.

Craig Erlam, analyst at online trading platform OANDA, suggested that gold is likely to continue to be "well supported against the backdrop of high inflation and enormous uncertainty."

The Consumer Sentiment Index released Friday, March 25) by the University of Michigan (UM) Consumer Survey fell to 59.4 in the March survey, down from 62.8 in February and 30 percent year-on-year, lending support to gold.

Another precious metal, silver for May delivery fell 30.5 cents, or 1.18 percent, to close at 25.615 dollars an ounce. Platinum for April delivery fell 22.7 dollars, or 2.2 percent, to close at 1.008.50 dollars an ounce.