Gold drops to 7-month low

Gold extended its losing streak on Friday, sliding to its lowest since early July as US Treasury yields continued their march higher, souring the non-interest bearing metal’s appeal. Spot gold fell 0.3 per cent to $1,769.61 per ounce, having hit its lowest since July 2 at $1,759.29 earlier in the session.

The safe-haven metal has slipped 2.9 per cent so far this week and is on track to match November 2018’s seven-day streak of daily losses, the longest since November 2016. US gold futures fell 0.5 per cent to $1,766.90.

On Friday, gold prices in Dubai for 24K touched Dh215.00 per gramme; 22K was at Dh201.75 per gramme; 21K at 192.50 per gramme and 18K at Dh165.00 per gramme.

“As long as yields move higher, the market is simply going to struggle to find a footing,” said Saxo Bank analyst Ole Hansen, adding that if the metal fails to hold the $1,765 level, a further downward move could be likely. Benchmark US Treasury yields hovered near a one-year high hit earlier this week, pushing investors into riskier assets and away from bullion.

Weaker US employment data that undermined recovery hopes also failed to keep gold prices afloat. But analysts say gold should still benefit from continued loose monetary policy and low real interest rates this year. Commerzbank analysts said in a note that gold’s behaviour resembled that of a tsunami, with prices receding in the first phase before coming back all the more violently.

For more than 2,000 years, gold has served as means of exchange and been used as a store of value. Gold is owned by institution and individual investors as well as central banks. Approximately 42 per cent of gold demand arises from investment and 34 per cent from jewellery. Jewellery is an integral part of gold market, particularly for countries like India and China. Around 17 per cent of gold is held by central banks across the globe and prices off late have been volatile, albeit with a downward bias.

“Given the intervention from central banks and their unlimited ammunition in terms of quantitative easing, intervention in markets by purchasing bonds, investors are chasing better yields by placing their bets on equity markets that carry certain amount of risk. Investors are opting to buy high yield debt that offer higher returns compared to investment grade and are chasing profits by placing their bets on crypto currencies that have seen tremendous rise and northward price movements, in particular Bitcoin and other crypto currencies,” said Dhaval Jasani, founder and chief executive officer at ZTI.

“To add to this trend, real yields for US Treasuries are on the verge of turning positive, which also serves as a safe haven asset. Hence, this outward shift from precious metals, particularly gold, to other investment assets. Current price levels of Gold are similar to price levels dating back to July 2020. We term this correction in gold prices as buying opportunity. This is a good time for buyers in India and UAE to purchase gold jewellery, given these attractive prices.”

— With inputs from Reuters, —sandhya@khaleejtimes.com