Gold price falls as robust dollar and bond yields negate US-Iran worries

May 9, 2018

London (May 9)  Gold prices fell on Wednesday as a robust dollar and rising bond yields overwhelmed any geopolitical worries after the US withdrew from the Iranian nuclear accord.

Dismayed European allies sought to salvage the international nuclear pact with Iran after US President Donald Trump pulled the US out of the landmark accord. "The fact that the cat is out of the bag and we have the announcement [on Iran] has removed some of the geopolitical support for gold," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

During times of political or economic uncertainty, gold prices often receive a boost as the metal is widely considered a safe-haven asset alongside the dollar and the Japanese yen.

Also weighing on gold, geopolitical tensions in the Korean peninsula continued to ease as US secretary of state Mike Pompeo arrived in Pyongyang and was expected to return from North Korea with three American detainees.

Spot gold was down 0.5% at $1,307.53 an ounce by 9.50am GMT after touching its lowest since May 3 at $1,304.11. US gold futures for June delivery shed 0.4% to $1,308 an ounce.

"The market, instead, has returned focus on the two key drivers for gold, which are bond yields and the dollar, and both are pointing the wrong direction from a higher gold perspective," Hansen said.

The dollar index rose to a fresh 2018 peak while yields on the benchmark 10-year US treasury note breached the key 3% level. A series of US bond auctions this week could further push up yields and pressure gold, running the risk that gold will challenge the key $1,300 support area, Hansen added.

Spot gold may revisit its May 1 low of $1,301.51 an ounce as it failed three times to break resistance at $1,317, said Reuters technical analyst Wang Tao. However, a surge in oil prices on Wednesday, to the highest since 2014, may stoke inflation and offer support to gold, analysts said.

In other precious metals, silver slipped 0.1% to $16.41 an ounce. Platinum fell 0.2% to $910.20 an ounce and palladium added 0.3% to $971.97 an ounce.


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