Gold fell for first time this week as Federal Reserve Chair Janet Yellen said bond yields “could see a sharp jump” after the central bank raises interest rates, crimping demand for the metal as an alternate investment.
Gold declined in the past two months as speculation mounted that the Fed’s benchmark rate would increase. Treasury yields have been held down by the three rounds of large-scale asset purchases that have swelled the central bank’s balance sheet by $4.47 trillion.
Higher borrowing costs cut gold’s allure because the metal generally offers returns only through prices gains, sending investors to assets with better yield prospects such as bonds. Traders are parsing economic data to assess the outlook for the timing of a rate increase. The government on May 8 releases statistics on jobs.
“Yellen’s statement about a rate hike is certainly weighing on the market as the market now believes that the Fed is committed to raising rates in September,” Fain Shaffer, the president of Infinity Trading Corp. in Indianapolis, said in a telephone interview. “In fact, we could see gold make a new low this year if we get a strong employment data on Friday.”
Gold futures for June delivery fell 0.2 percent to settle at $1,190.30 an ounce at 1:46 p.m. on the Comex in New York. Aggregate trading was 24 percent below the 100-day average, data compiled by Bloomberg show. The price rose 1.6 percent in the past two days.
“You are seeing lot of posturing before Friday, since the payroll data is a very big event,” Frank Lesh, a trader at FuturePath Trading LLC in Chicago, said in a telephone interview. “It all depends on how strong the data is, and a lot of people at the moment are staying on the sidelines.”
Employers in the U.S. probably added 230,000 workers last month, up from 126,000 in March, according to the median estimate in a Bloomberg survey of economists.
On March 17, gold touched $1,141.60, the lowest since Nov. 7.
Silver futures for July delivery fell 0.4 percent to $16.506 an ounce on the Comex.
Platinum futures for July delivery dropped 0.5 percent to $1,142.80 an ounce on the New York Mercantile Exchange.
Palladium futures for June delivery declined 0.3 percent to $792.65 an ounce.