Gold falls under pressure from rising dollar and bond yields

Gold prices continued to decline, affected by the rise in the dollar and US bond yields, with increasing expectations that the Federal Reserve (the US central bank) would soon begin to reduce its massive asset purchase program.

The precious metal fell in spot transactions by $4.2, or 0.24 percent, to $1,752.5 an ounce.

And it fell in US futures contracts by $ 4.55, or 0.25 percent, to $ 1752.45 an ounce.

The dollar’s rise put pressure on the prices of the yellow metal, as this reduces the attractiveness of gold to holders of other currencies.

The dollar index, which measures the performance of the US currency against a basket of six major competing currencies, rose by 0.08 percent, to 94.32 points, the highest level since September 2020.

Gold was also negatively affected by the rise in US bond yields to 1.5 percent, the highest level since last June.

High returns on bonds increase the opportunity cost of holding gold, and thus reduce its attractiveness.

The rise in the dollar and bond yields comes with estimates that the US Central Bank will begin, next November, to reduce a broad program to purchase treasury bonds and securities secured by mortgages, at a rate of 120 billion dollars per month, which it started in March 2020.

Reducing the asset purchase program paves the way for raising interest at a later date, likely to be mid-2022, with the acceleration of the recovery of the largest economy in the world from the repercussions of Corona and high inflation.

And Thursday, data from the Office of Statistical Analysis showed that the growth of the US economy in the second quarter of 2021 accelerated by 6.7 percent, on an annual basis, up from 6.3 percent growth in the first quarter.

 
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