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Gold hits 7-week low as US dollar firms, Treasury yields climb
[LONDON] Gold slid to a seven-week low on Monday as the US dollar pared losses after its worst quarterly performance in seven years and 10-year US Treasury yields climbed, weighing on appetite for non-interest bearing bullion.
Gold ended June with its first monthly loss of the year after the strength it saw in early 2017 ran out of steam in the second quarter, dampened by a rise in bond yields.
Spot gold was down 0.7 per cent at US$1,233.16 an ounce at 1130 GMT, while US gold futures for August delivery were down US$8.90 an ounce at US$1,234.40.
The metal is finding some chart support near its 200-day moving average. It rallied US$50 an ounce to a near seven-month high in the three weeks after breaking above that level in May, but has declined steadily ever since.
"On US dollar-priced gold, we are currently testing the 200-day moving average," Saxo Bank's head of commodity strategy Ole Hansen said. "The political front is likely to attract continued demand, but (that is) currently not strong enough to offset the impact of rising yields."
European shares began the new quarter with solid gains, while the US dollar lifted from nine-month lows as US Treasury yields hit their highest since mid-May.
Germany's 10-year government bond yield pulled back after last week's sharp selloff, but held near 3-1/2 month highs.
Gold failed to benefit from US dollar weakness in the second quarter, as this was driven largely by expectations for tightening monetary policy outside the United States.
"Higher global rates would weigh on gold - as we have highlighted on several occasions, the potential for higher EUR rates and the upward pressure this might have globally is a key risk that we are watching," UBS said in a note.
"Ahead today, US inflation data comes into focus given the read-through to real rates." US Mint sales of American Eagle gold coins totalled 6,000 ounces in June, down 92 per cent from June 2016 and bringing the tally for the first half of the year to 192,500 ounces.
Silver was down 0.7 per cent at US$16.46 an ounce.
Silver was the worst performer of the major precious metals in the second quarter, ending the period down 9 per cent.
Palladium , the last quarter's biggest riser with a near 6 per cent gain, was up 0.2 per cent at US$842.75 an ounce, while platinum was 0.4 per cent lower at US$917.40 an ounce.