Gold drops as US yields lift dollar

london — Gold fell to its lowest since mid August on Monday as rising US Treasury yields pushed the dollar higher, while concerns over violence during Catalonia’s independence vote at the weekend weighed on the euro.

Expectations that the Federal Reserve will push ahead with a third US interest rate hike this year, upbeat US data and talk of a possibly more hawkish successor to Fed Chair Janet Yellen all lifted Treasury yields.

Rising yields tend to weigh on non-interest bearing gold, while strength in the dollar makes assets priced in the US currency more expensive for buyers holding other currencies.

Spot gold was down 0.5 percent at $1,273.21 an ounce at 0940 GMT, having earlier touched a near seven-week low at $1,270.60 an ounce. US gold futures for December delivery were down $8.70 an ounce at $1,276.10.

The metal posted its biggest monthly fall so far this year in September, despite netting a quarterly rise of three per cent partly due to tensions over North Korea’s nuclear ambitions.

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

“The dollar has jumped to six-week highs, Treasury yields have surged to three-month highs as investors search out risk assets, and US equities reached new record highs on Friday,” he added. — Reuters