Gold dips as firmer dollar offsets easing bond yields

Gold dips as firmer dollar offsets easing bond yields

Gold edged lower on Friday, as a firmer dollar made bullion more expensive for other currency holders, although a pullback in the U.S. Treasury yields limited losses for the safe-haven metal.

FUNDAMENTALS
Spot gold was down 0.2% at $1,823.77 per ounce by 0127 GMT. Bullion lost 0.4% so far this week.

U.S. gold futures were steady at $1,823.20.

The dollar index held firm near a one-week high, and was set for a weekly gain against its rivals.

Benchmark U.S. 10-year Treasury yields slipped from a more than one-month high hit on Thursday. Lower bond yields reduce the opportunity cost of holding non-interest bearing gold.

Recent economic readings out of the United States have sparked concerns over rising inflation and raised bets over an earlier-than-expected Federal Reserve rate hike.

The U.S. central bank has pledged to keep interest rates low until the economy reaches full employment, and inflation hits 2% and is on track to “moderately” exceed that level for some time.

Gold tends to benefit from lower interest rate environment as it reduces the opportunity cost of holding non-yielding bullion.

Fed Governor Christopher Waller said he expects inflation to exceed the Fed’s 2% target for the next two years, but added that the Fed would not raise rates until it sees inflation above target for a long time, or excessively high inflation.

Palladium gained 0.7% to $2,883.71 per ounce, but was on track to post a second straight weekly loss with a drop of about 2%.

Silver was flat at $27.06 per ounce, while platinum was up 0.6% at $1,212.88.

DATA/EVENTS (GMT)

1230 US Retail Sales MM April

1315 US Industrial Production MM April

1400 US U Mich Sentiment Prelim May

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