Gold slips as yields climb, faces weekly drop

Gold eased on Friday and was headed for a weekly fall, as higher Treasury yields dented the appeal of zero-yield bullion, with a stronger dollar adding further pressure.

Spot gold was down 0.2% at $1,934.01 per ounce. U.S. gold futures fell 0.8% to $1,937.90.

“It is in particular the developments in the fixed income markets with yields rising again,” that are pressuring gold, said Quantitative Commodity Research analyst Peter Fertig.

Yields on the benchmark U.S. 10-year Treasury note rose back above 2.4% on Friday after dropping to a one-week low in the previous session. Higher yields increase the opportunity cost of holding gold, which yields nothing.

The U.S. dollar firmed for a second straight session, making greenback-priced gold less appealing.

Gold is on course to end the week about 1.4% lower, having dropped earlier this week on signs of progress in talks between Russia and Ukraine. Negotiations aimed at ending the five-week war were set to resume even as Ukraine braced for further attacks in the south and east.

A key U.S. jobs report that could help the Federal Reserve decide whether to order an interest rate hike of up to 50 basis-points next month is due later on Friday.

“A downside surprise on employment and earnings should not dent market rate hike pricing for 2022, with the Fed shifting to inflation-fighting mode,” said Stephen Innes, managing partner at SPI Asset Management in a note.

“By contrast, a beat on jobs data would add weight to the idea that the U.S. economy has more underlying momentum than the Fed previously assumed.”

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