Gold heads for 3rd straight loss as dollar, Treasury yields climb

Silver futures retreat more than 1%

Gold futures fell for the third session in a row Monday, hit by strength in the dollar and gains in Treasury yields, as the 10-year note drew ever closer to 3%.

June gold GCM8 was down $7.70, or 0.6%, to $1,330.60 an ounce. That puts the metal down more than 2% since hitting a 2 ½-month high of $1,360 as recently as April 11.

For last week, gold futures fell by roughly 0.7%, the first such loss in three weeks.

May silver SIK8 tumbled 22 cents, or 1.3%, to $16.94 an ounce on Monday, pulling back from its own 2 ½-month high hit last week. The contract saw a 3% gain for the week.

“Despite commodities prices pulling strongly higher in recent sessions, the gold price has failed to partake,” said Richard Perry, market analyst with Hantec Markets. “Increased inflationary expectations should be supportive for gold, which is often seen as an inflationary hedge, but the stronger dollar has certainly had a bigger negative impact on gold.”

Perry pegged near-term support for gold prices at $1,321, now that the metal has dropped below support at $1,333.50.

The ICE U.S. Dollar Index DXY was up 0.4% at 90.72. Its gain lowers the appeal of dollar-priced commodities, including gold, to investors using other currencies.

Bond yields, which are reflecting a rise in inflation expectations, were on the march higher Monday, a continuation of gains logged last week. The 10-year Treasury note yield hovered around 2.984% on Monday, after jumping to 2.956% on Friday, for the highest level since January 2014.

The rise in U.S. interest rates has come as traders increasingly start to price in four interest-rate hikes in 2018 from the Federal Reserve, rather than the three signaled by policy makers. On Friday, traders on the fed-fund futures market saw a 38% chance of four hikes this year, compared with 24.5% on April. 11.

Higher yields can dull the investment appeal of nonyielding bullion. It’s also true that accelerating inflation can eventually lure investors into the shelter of fiat gold, meaning bond market moves tend to have mixed implications for the metal. So far, however, rising yields have driven gold lower.

As for Monday’s economic reports, the Chicago Fed national activity index for March is scheduled for release at 8:30 a.m. Eastern Time. Preliminary readings of the manufacturing and services purchasing managers’ indexes for April from Markit are expected at 9:45 a.m. Eastern, followed by data on existing-home sales for March at 10 a.m. Eastern.

The SPDR Gold Shares GLD exchange-traded fund slipped 0.5% premarket after a weekly loss of 0.6%. The iShares Silver Trust SLV fell 1%, after notching a weekly rise of 3.1%, while the VanEck Vectors Gold Miners GDX shed 0.5% early Monday after it dropped 0.6% last week.

Elsewhere in the metals market, May copper HGK8 slipped 0.1% to $3.1325 a pound after ending about 2.1% higher on the week Friday. July platinum PLN8 shed 0.6% to $926.40 an ounce. June palladium PAM8 was down 2.1% to $1,008.35 an ounce.