Gold slips to seven-week low as US 10-year Treasury note yields rise

NEW YORK/LONDON — Gold fell to its lowest in nearly seven weeks on Monday as rising US Treasury yields pushed the dollar higher while concern over violence during Catalonia’s independence vote at the weekend weighed on the euro.

“The recent sell-off is mostly related to a stirring of the reflation trade following the announcement by the Trump administration of the long-awaited tax reform proposal,” Mitsubishi analyst Jonathan Butler said.

Spot gold was down 0.40% at $1,273.78 per ounce by 1:46 p.m. EDT (1746 GMT), after touching $1,270.60, the lowest in nearly seven weeks. US gold futures for December delivery settled down $9, or 0.70%, at $1,275.80 per ounce.

World stock markets climbed on Monday on optimism over the corporate earnings outlook and US President Donald Trump’s tax reform plan, while the dollar gained after a manufacturing index rose to its highest since 2004.

Benchmark US 10-year Treasury note yields hit their highest since mid-July on expectations that the Federal Reserve will increase US interest rates for a third time this year, upbeat US data and talk of a possibly more hawkish successor to Fed Chair Janet Yellen.

The euro also came under pressure after Spanish police used batons and rubber bullets in an effort to thwart an independence vote in Catalonia on Sunday, injuring hundreds. The euro zone single currency was down 0.60% versus the dollar.

Rising yields typically make bonds more attractive compared to gold, while strength in the dollar makes assets priced in the US currency more expensive for buyers holding other currencies.

Among other precious metals, silver was down 0.10% at $16.59 an ounce after marking its lowest since Aug. 9. Platinum rose 0.50% at $914.10 per ounce, after hitting its lowest since mid-July. Palladium was down 2.30% at $913 per ounce.

“There is arguably speculative froth in the palladium price, so a short-term correction is likely,” GFMS analyst Ross Strachan told the Reuters Global Gold Forum on Monday.

“However, the longer- term picture is one where the sharp downward path for stocks of palladium means that eventually (it) is likely to reach a sustained premium over platinum. Our new forecasts show that on an annual average basis we expect palladium to exceed platinum in 2019.” —