Gold slips as US yields spike; palladium at one-year peak

[BENGALURU] Gold prices dropped on Thursday as a surge in US bond yields and a firmer US dollar hammered bullion's appeal, while palladium jumped as much as 7 per cent on strong demand prospects amid supply disruption worries.

Spot gold was down 0.7 per cent at US$1,732.99 an ounce by 01.49pm EDT (1749 GMT), after touching its highest since March 1 at US$1,755.25.

US gold futures settled up 0.3 per cent at US$1,732.50.

The benchmark US 10-year Treasury yield vaulted above 1.7 per cent for the first time since January 2020, while the US dollar rose 0.5 per cent.

Federal Reserve Chairman Jerome Powell on Wednesday repeated a pledge to hold interest rates near zero in an effort to keep the economic recovery on track even if inflation breached its 2 per cent target this year.

"Yesterday's Powell comments on interest rates were very supportive for gold, but on the other side of the coin the fact that 10-year yields continue to rise has limited any upside in gold," said Bob Haberkorn, senior market strategist at RJO Futures.

Some investors view gold as a hedge against higher inflation that could follow stimulus measures, but higher Treasury yields dull some of the appeal of the non-yielding commodity.

"On one hand, the regime doesn't bode well for investment flows into gold, and that creates pressure to the downside. On the other hand, we do see some buyers on the dip," TD Securities commodity strategist Daniel Ghali said.

Autocatalyst metal palladium was up 3.6 per cent at US$2,662.17, after earlier hitting its highest since February 2020 at US$2,755.18.

Russia's Nornickel Nickel , the top producer of palladium, cut its 2021 output forecast on Tuesday because of waterlogging at two Siberian mines.

"Any disruption in supply, especially out of a major producer, is absolutely playing into this market, along with expectations of more demand from the automobile sector," RJO Futures' Mr Haberkorn said.

Platinum gained 0.4 per cent to US$1,218.23, while silver fell 0.4 per cent to US$26.22.

REUTERS