Gold extends losses on firm US dollar, surge in Treasury yields

[NEW YORK] Gold fell for the fifth straight day on Tuesday, weighed down by a firmer dollar and a jump in Treasury yields as well as uncertainty about whether the US central bank will raise interest rates next week.

"It was looked at as a safety trade early in the morning. As the day weighed on and the Treasury auction failed to produce the results expected, we saw yields jump up and the gold market fell," said Phillip Streible, senior market strategist for RJO Futures in Chicago.

Some investors withheld bids for the latest supply of US 30-year government bonds, propelling their yields to the highest levels since Britain's vote to leave the European Union in late June.

World stock markets and energy prices fell as the US dollar rose 0.5 per cent.

Spot gold was down 0.7 per cent at US$1,317.47 an ounce by 3:03pm EDT (1903 GMT). US gold futures settled down 0.14 per cent at US$1,323.70 per ounce.

A member of the US Federal Reserve's rate-setting committee (FOMC) said on Monday the case for tightening monetary policy was "less compelling", leading traders to trim the odds of a September rate rise to 15 per cent from 24 per cent on Friday, according to CME Group.

"We're treading water today after the bounce we received from the FOMC comments yesterday, but gathering from the limited impact we've seen the market is still probably concerned about the potential for a rate hike later this month," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen, before prices fell to session lows.

The Fed will have a two-day meeting next week.

Platinum dropped 2.1 per cent to US$1,032, after falling to US$1,027.50, right around the 200-day moving average and the lowest price since July 1.

"The weak rand may also prompt South African investors to further reduce their platinum and palladium ETF (exchange-traded fund) holdings," Commerzbank said in a note.

Palladium fell as much as 1.7 per cent to US$649.22, the lowest since July 20.

"PGM (platinum group metals) prices are expected to improve modestly on structural drivers into fourth-quarter 2016," Citi Research said in a note.

"Given strong automotive demand in terms of increased loadings in Europe as well as robust production volumes in China, we believe the PGMs should maintain double-digit returns for the year."

Spot silver declined 1.2 per cent to US$18.83 an ounce, after hitting a more than one-week low of US$18.69 in the previous session.

REUTERS