Gold finished a week that many investors won’t quickly forget as they were reminded that they should watch movements in US bond yields more closely.
The strong kick over 3% and to nearly on 3.1% startled gold bugs out of their complacency and left them with loses of around 2.2%.
While not as large a fall as the 2.6% we saw last December (for the week ending December 8) it was a timely reminder that gold is influenced by movements in the US bond yields as much as world tensions.
The 10 year yield hit the highest level since 2011 and the accompanying rebound in the value of the US dollar (up 1.2% last week) combined to push gold and many other commodities higher – but not oil (see separate story).
As a result, gold had its worst month since the big fall last December even though it edged up 0.2% on Friday on Comex in New York.
June gold rose $US1.90, or nearly 0.2%, to settle at $US1,291.30 an ounce.
“With the dollar heavily supported by positive economic data and [interest] rate hike expectations, zero-yielding gold is likely to remain vulnerable to heavy losses,” said Lukman Otunuga, research analyst at FXTM said in a client note, according to Marketwatch.com.
“While geopolitical tensions and uncertainty could offer some support, price action shows that bears remain firmly in control,” he said in a daily note. “Taking a look at the technical picture, previous support at $1,300 could transform into a dynamic resistance that encourages a decline towards $1,280.”
Ten year Treasury bonds held at a 7-year peak on Friday, though it moderated somewhat from a peak around 3.125% earlier on Friday to 3.058% at the close.
Among other metals, Comex July silver fell almost 0.2% to $US16.455 an ounce, for a 1.8% weekly fall. Comex copper for July delivery fell 0.8% to $US3.064 a pound, ending down 1.5% for the week.
The Metal Bulletin 62% Fe Iron Ore Index ended at $US66.92 a tonne in northern China Qingdao, down by 57 cents on Friday and 50 cents from the week before when it ended at $US67.42 a tonne.
In London the strengthening US dollar hit LME metal prices.
LME three month aluminium fell to a two-week low on Friday, while copper had its first weekly loss in three.
Three-month aluminium on the London Metal Exchange ended at $US2,270 a tonne, down 1 percent.
Earlier it touched its weakest since May 2 at $US2,245 a tonne.
LME copper ended the day down 0.3% at $US6,855 a tonne, a 0.9% fall over the week.
