Gold hits fresh 2018 low as rising yields lift dollar
Downward momentum in gold picked up after the metal broke below support at its 200-day moving average at $1,306 an ounce. That firmly underpinned prices earlier this month.
Spot gold was down 1.57 percent to $1,291.87 an ounce by 3:10 p.m. ET earlier hitting its lowest since late December at $1,289.40. U.S. gold futures for June delivery settled down $27.90 to $1,290.30.
Israeli troops shot dead dozens of Palestinian protesters on the Gaza border Monday when the high-profile opening of the U.S. embassy to Israel in Jerusalem by the Trump administration raised tension to a boiling point.
But gold investors were fixated on the dollar, which rose versus a currency basket as 10-year U.S. bond yields shot above 3 percent, sending borrowing costs higher in a number of other countries.
"It's a risk-off play across the board. The downward slide in pretty much all commodities and equities, you can refer that to a stronger dollar and higher yields," said David Meger, director of metals trading at High Ridge Futures. A Federal Reserve official backed the case for further U.S. interest rate hikes, saying inflation had not yet reached the U.S. central bank's 2 percent goal in a sustained way.
A Federal Reserve official this week backed the case for further interest rate hikes in the United States, saying inflation had not yet reached the U.S. central bank's 2 percent goal in a sustained way.
Higher U.S. interest rates tend to boost the dollar and bond yields, making greenback-denominated gold more expensive for holders of other currencies and denting the appeal of non-yielding assets such as bullion.
"The market's been waiting for the next rate hike by the Fed ... and I think gold prices are going to remain under pressure till we get through that hike," ANZ analyst Daniel Hynes said in a note.
However if yields were to ease, bullion could recover lost ground over the coming days, Forex.com market analyst Fawad Razaqzada said. "Otherwise the only hope for dollar-denominated gold is a potential correction in the greenback now."