Spot gold fell more than $20 at one point in New York on February 17, breaking its lowest level since November 30 to $1769.65 an ounce, as bets on economic recovery boosted yields on the dollar and benchmark Treasuries. Rising optimism about the $1.9 trillion US stimulus package, coupled with rising inflation expectations, pushed up benchmark 10-year Treasury yields, which in turn pushed the dollar to its highest level in more than a week.
Spot gold fell more than $20 in New York trading on Wednesday, breaking its lowest level since November 30 to $1769.65 an ounce, as bets on an economic recovery boosted yields on the dollar and benchmark Treasuries. Rising optimism about the $1.9 trillion US stimulus package, coupled with rising inflation expectations, pushed up benchmark 10-year Treasury yields, which in turn pushed the dollar to its highest level in more than a week.
Comex gold futures for April delivery fell 1.5% to close at $1772.80 an ounce. Gold, which last year posted its biggest annual gain in a decade, fell for a fifth straight day on Wednesday as expectations of more economic aid and progress in vaccination fuelled optimism about economic growth. David Meger, head of metals trading at High Ridge Futures, said the US economy was expected to recover slowly, with optimism about defeating the coronavirus reflected in a slightly stronger dollar and 10-year Treasury yields, which rose to their highest level since February 2020.
A stronger dollar and better-than-expected US economic data have reduced the attractiveness of gold as a safe haven. Us retail sales rose at their fastest pace in seven months in January, reflecting a rebound in household demand after a weak performance in the fourth quarter, thanks to factors such as the government's bailout cheques to deal with the impact of the epidemic. Us manufacturing output grew faster than expected in January and rose for the fourth month in a row, indicating that the industry continues to recover from the disruption caused by the novel coronavirus epidemic.
The break-even inflation rate, which measures expected inflation, reached 2.2 per cent, the highest level since August 2014. Fed officials last month debated how to lay the groundwork for public acceptance of higher inflation and the need to be wary of signs of stress in soaring asset markets, according to minutes of the Fed's January policy meeting.
Carsten Fritsch, an analyst at Commerzbank, said stronger-than-expected retail sales in the US put pressure on defensive assets such as gold, with a rise in the dollar and a 1.3 per cent yield on 10-year Treasuries as other factors weighing on gold.
