Gold slips as US dollar claws back, Treasury yields gain

[NEW YORK] Gold prices fell on Monday as a recovery in the US dollar and rising government bond yields prompted investors to cash in bullion after its sixth weekly price rise in seven weeks.

"We're seeing gold under pressure because the global bond yields are up across the board," said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals."Germany, Italy, all up."

US Treasury yields hit multiyear highs on expectations that central banks around the world would reduce stimulus as economies improve. Higher yields on bonds make gold a less attractive investment because it pays no interest.

Spot gold was down 0.5 per cent at US$1,342.56 an ounce by 2.05pm EST (1905 GMT), while US gold futures for February delivery settled down US$11.80, or 0.9 per cent, at US$1,340.30.

Gold has risen more than 3 percent this month, and after a strong end to December touched its highest since August 2016 last week at $1,366.07 an ounce.

"Asset managers have been increasing their exposure to gold since the beginning of the year," said TD Securities commodities strategist Daniel Ghali. "With prices above US$1,320 (an ounce), you could expect some want to take some profits as well."

Gold prices have benefited largely from a slide in the dollar index to three-year lows. A rise in the currency on Monday after six straight weeks of losses pulled gold back.

Rising bond yields helped underpin the greenback ahead of a week packed with US data. It remains on track for its biggest monthly decline since March 2016, however.

The currency came under pressure last week after Treasury Secretary Steven Mnuchin indicated he was broadly supportive of a weak dollar, although US President Donald Trump later said he wanted to see strength in the greenback.

Traders now await US employment data and the outcome of a Federal Reserve policy meeting this week and will watch for implications for US interest rates.

Among other precious metals, silver dropped 1.2 per cent to US$17.19 an ounce. It rose 2.3 per cent last week, the biggest gain for any of the major precious metals.

Platinum , this year's best-performing precious metal so far, was down 0.2 per cent at 1,007.80 an ounce after easing 0.3 per cent last week in its first weekly decline in seven.

Palladium was down 0.4 per cent at US$1,087.90 an ounce, approaching a 2-1/2-week low.

REUTERS