Gold stopped its three-day rise as Treasury yields rose after US macro data boosted optimism about the economic recovery.
ISM Services PMI exceeded expectations, which strengthens the prospect of reducing incentives from the Federal Reserve. Yields on 10-year bonds jumped above 1.53%, with the USD also rising, putting pressure on the precious metal.
Traders and investors are also taking into account the rising inflation resulting from rising commodity and housing prices in China. The prospect that stagflation – high inflation coinciding with slower growth – may persist even when supply problems are alleviated increases caution among market players.
In Asia, concerns are growing about indebted companies in China’s housing sector as another company misses a bond payment. Against this background, the USD took advantage as investors sought safe haven play.
The monthly US job data, due to be released on Friday, will be closely monitored to assess labor market strength and potential impact on the Fed’s monetary policy timeline.
“The prospect of reducing Fed asset purchases will keep gold under pressure and limit the upward potential of the price,” said Gnanasekar Tiagarajan, director of Commtrendz Risk Management Services.
Spot gold fell 0.4% to $ 1,762.72 after rising 2.5% in the previous three trading sessions. Silver and platinum declined, while palladium traded mostly flat. The USD DXY index rose 0.2% after a three-day decline.
Charts: with permission of Bloomberg Inc.
Junior Trader Nikolay Petrov