Gold held steady on Friday, June 30, buoyed by a plunging dollar and sliding stocks but hawkish comments from major central banks suggesting a shift toward tighter monetary policies kept the bullion shy of major gains.
Spot gold rose 0.1 per cent to $1,246.62 per ounce, as of 0436 GMT. US gold futures for August delivery were up 0.1 per cent at $1,246.90 per ounce.
Gold slid 1.7 per cent in June in its first monthly decline this year, but gained over 8 per cent so far in 2017.
“Typically, a weaker dollar should provide gold with something of a tailwind, but the fact this has not been happening suggests that there is an offsetting variable at work here,” INTL FCStone analyst Edward Meir said in a note.
“The first thing that comes to mind is that yields on both sides of the Atlantic are pushing higher, as a raft of hawkish comments from various central bankers are roiling Western bond markets,” he added.
On Thursday, Germany’s 10-year government bond yield rose to a seven-week high, and benchmark US Treasury yields touched six-week highs on the likelihood that central banks in Europe will become less accommodative.
Comments from top central bankers including European Central Bank head Mario Draghi, Bank of England Governor Mark Carney, and top policymakers at the Bank of Canada earlier this week have indicated that quantitative easing is being put back in its box and interest rates are going to go up.
Gold is highly sensitive to rising interest rates, which increase the opportunity cost of holding non-yielding bullion. However, losses in the dollar, in which it is priced, have been offsetting the impact of higher yields to keep gold range-bound.
