Gold ends worst month since late 2016

Gold recorded its worst month since late 2016 as a stronger dollar and expectations for improving economies diminish demand for the safe-haven asset. Bullion has fallen more than 8% this year, including a 6% drop in February, as traders focus on a recovery from the Covid pandemic and higher US Treasury yields, which make gold less competitive because it doesn’t offer interest. That has caused holdings in gold-backed exchange-traded funds to fall to lowest since July.

The afternoon fixing on Friday by the London Bullion Market Association was $1,742.85 an ounce compared with $1,786.20 a week earlier. Thai selling prices were quoted at 25,100 baht per baht-weight (15.2 grammes).

Gold “is having a rough 2021 and the only thing that can right the ship is if central banks thwart the trajectory of bond yields”, said Edward Moya, a senior market analyst at Oanda Corp.

Natixis analyst Bernard Dahdah said he didn’t expect a gold “collapse” along the lines of what happened in 2011, “but clearly there will be some pressure on prices as economies in the West open up”.

He sees gold around $1,700 in the longer term given the abundance of liquidity in financial markets.

Bullion may also face downward pressure from stock market sell-offs as some investors look for cash to cover margin calls, he added.

In the physical market, gold demand in India gained momentum last week as retail buyers and jewellers took advantage of prices near eight-month lows at 46,000 rupees per 10 grammes.

“Consumers are quite comfortable with current price level. There is good demand for jewellery from retail buyers,” said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the city of Kolkata.

He added that the 50,000-rupee mark is a psychological barrier for Indian consumers.