Gold retreats from near five-month peak on firmer yields, equities

[BENGALURU] Gold prices on Wednesday retreated from a near five-month high marked in the previous session, as an uptick in bond yields weighed on the safe-haven metal while strong US economic data prompted the shift back into riskier assets.

Spot gold was down 0.1 per cent at US$1,898.58 per ounce, as of 12.53am GMT, after hitting its highest since Jan 8 at US$1,916.40 on Tuesday.

US gold futures eased 0.2 per cent to US$1,901.90 per ounce.

Data showed that US manufacturing activity picked up in May as pent-up demand in a reopening economy boosted orders. But unfinished work piled up because of shortages of raw materials and labour.

The US 10-year Treasury yield rose to a more than one-week high overnight, increasing the opportunity cost of holding non-interest bearing gold.

Risk sentiment in wider finical markets remained upbeat as investors weighed the latest US economic data for signs of a rebound and higher inflation reading.

Euro zone inflation surged past the European Central Bank's elusive target in May, heightening a communications challenge for policymakers who will happily live with higher prices for now, but may face a backlash from irate consumers.

Higher inflation is compounding the plight of savers and the ECB should respond by raising its interest rates from 0 per cent, Bavaria's Finance Minister Albert Fueracker told daily Bild in comments published on Wednesday.

Market participants' focus this week will be on US payrolls data due on Friday for further clarity on economic recovery and near-term Federal Reserve policy action.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.3 per cent to 1,045.83 tonnes on Tuesday from 1,043.21 tonnes on Friday.

Palladium fell 0.1 per cent to US$2,856.82 per ounce, silver edged 0.1 per cent lower to US$27.88, and platinum was steady at US$1,191.51.

REUTERS