Gold set for weekly decline as greenback steadies after U.S. Treasury yields rise

Gold prices edged lower as a rise in U.S. Treasury yields forced investors to reassess their positions again after a steep retreat from a record peak earlier this week, putting the safe-haven metal on course for its first weekly fall since early June.

Spot gold was trading 0.3 percent down at $1,947.95 an ounce by 0916 GMT, having hit a low of $1862.89 on Wednesday, its lowest since July 22. Bullion declined 4 percent so far this week, its biggest weekly percentage fall since early March. U.S. gold futures fell 0.7 percent to $1,955.80.

The dollar index steadied following a jump in U.S. bond yields and a drag on sentiment from lacklustre Chinese economic data. The benchmark U.S. 10-year yields are up nearly 15 basis points this week in the sharpest jump since early June, as the U.S. Treasury flooded the market with supply.

China’s retail sales unexpectedly extended their fall into a seventh month in July and industrial output missed expectations, suggesting domestic demand is still struggling after the coronavirus outbreak.

The greenback was also supported by strong U.S. jobs data that dented gold’s appeal. Data released yesterday showed the number of Americans seeking unemployment benefits declined below one million for the first time since the start of the COVID-19 pandemic. However, the upside in the dollar appears limited as politicians remain deadlocked over the next relief package.

Investors await progress in negotiations over U.S. economic stimulus that could prevent a nascent recovery in the U.S. economy from sliding into reverse.

The greenback against a basket of currencies traded 0.1 percent up at 93.37, having touched a high of 93.91 on Wednesday, its highest since August 3. The U.S. Treasury yields declined, with the benchmark 10-year note yield trading at 0.696 percent but close to a 7-week high hit on Thursday.

Markets now await U.S. retail sales and Michigan Consumer Sentiment Index for signs of recovery, with key U.S.-China trade talks on August 15 also eyed.