Gold stages a retreat as government bond yields jolt higher

MarketWatch/Mark DeCambre/06-29-17

Gold prices threatened to snap a three-session climb on Thursday as a global rise in government bond yields diminished the appeal of investing in precious metals that don’t bear interest.

…Moves were fueled in part by a world-wide selloff in bonds that were pushing prices of sovereign paper lower and yields higher. Yields of U.S. Treasurys, notably the 10-year Treasury note and European bonds, like the comparable German bond shot to their highest levels in more than a month. The 10-year Treasury note was at 2.28%, compared with 2.146% to start the week, while the 10-year German bond, known as the bund, was yielding 0.43%, compared with 0.254% at the start of the week.

…“We have a balanced gold outlook with our 6/12 month forecasts at $1250/oz. On the one hand, we expect higher US real rates and Fed balance sheet reduction to put downward pressure on gold,” the Goldman note said. That said, said pressure on the yellow metal going forward may be offset by weak U.S. global growth, appetite for precious metals from emerging-markets amid expected softness in the dollar and peak supply late in 2017. “Making gold more attractive to longer term investors.”

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