After recording its worst month since 2016, gold's price started the new month steady as investor focus remained on bond yields and the outlook for growth.
The safe-haven asset had a rocky start to the year as the higher Treasury yields weighed on demand for the bullion and as the roll-out of vaccinations worldwide spurs optimism about a recovery from the pandemic. Over the weekend, the U.S. House of Representatives passed President Joe Biden’s $1.9 trillion Covid-19 aid package and the bill now heads to the Senate.
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Asian and European central banks have made moves to calm the panic that sent global bonds tumbling and Treasury yields to their highest level in a year. Concerns on the possibility of a pullback in fiscal support are being spurred by bets on accelerating inflation, despite the assurances from the Federal Reserve that higher yields are reflecting strong optimism for an economic recovery.
“Bond markets continue to signal the end of the interest rate reduction cycle,” said Michael McCarthy, chief market strategist at CMC Markets. “If the inflationary pressures reflected by sharply lower bond prices are evident by mid-year, central banks will have little choice but to wind back their current support. A falling gold price shows that the main concerns are about higher rates, over-riding any safe haven attraction to the yellow metal.”
Spot gold rose 0.4 percent to $1,741.55 (N827,212.5) an ounce at about 2:20 Nigerian time after sliding by 2.1% on Friday. That brought the loss in February to 6.2 percent, the most since November 2016.
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