Gold rises as U.S. bond yields decline, virus concerns grow

Published On: July 20, 2021Categories: Alternative Investments1.3 min read

Spot gold rose 0.3% at $1,817.27 per ounce, while U.S. gold futures advanced 0.4% to $1,816.70

Price of gold increased on Tuesday, amid a decline in U.S. bond yields and worries over a surge in Delta variant cases, although bullion’s gain was restricted by a stronger dollar.

Spot gold was up 0.3% at $1,817.27 per ounce by 0311 GMT, after reaching a one-week low of $1,794.06 in the previous session. U.S. gold futures advanced 0.4% to $1,816.70.

The gold market is getting relief because of extremely low yields. But gold is competing with the dollar for safe-haven demand, so that is going to limit upside momentum over the near-term, said Stephen Innes, managing partner at SPI Asset Management.

Benchmark 10-year Treasury yields were near five-month lows. Lower yields reduce the opportunity cost of holding non-interest bearing gold.

Increasing Covid infections across the US and other countries fuelled fears of a pandemic resurgence, sending shockwaves through stock markets, as the highly contagious Delta variant appeared to be taking hold.

Gold is often used as a safe store of value during times of political and financial uncertainty.

However, safe-haven gains for the U.S. dollar limited gold’s appeal as the dollar index held firm near 3-1/2-month highs against its rivals. A stronger dollar makes gold more expensive for other currency holders.

Meanwhile in Europe, European Central Bank (ECB) policymakers are set for a showdown this week as they chart a new policy path amid growing concerns over a third wave of Covid infections.

The Delta variant may possibly cause central banks to be a little more dovish. The UK is running an experiment opening up their economy, which might lead to an explosion in the case count. So, owning gold here for that edge is not a bad idea, Innes said.

About the Author: Jonathan Adams

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