India Markets closed

Gold falls on bond yields, U.S. tax doubts limit losses

A 1000 gram gold bar is seen at the Kazakhstan's National Bank vault in Almaty, Kazakhstan September 15, 2017. REUTERS/Mariya Gordeyeva

By Renita D. Young and Peter Hobson

NEW YORK/LONDON (Reuters) - Gold prices turned lower on Friday as U.S. Treasury bond yields rose, but losses were limited by weaker stock markets and the dollar, which fell due to uncertainty over U.S. tax reform.

A rise in U.S. bond yields pressures gold by reducing the attractiveness of non-yielding bullion, while a weaker dollar makes bullion cheaper for holders of other currencies.

"A higher yield tends to increase the cost to carry gold, and we had a little uptick in the yield curve slope," said Bart Melek, head of commodity strategy at TD Securities in Toronto.

Two-year yields were at a nine-year high as traders closed out curve-flattener positions and dealers reduced their holdings of longer-date debt following this weeks auctions. [US/]

Spot gold was down 0.7 percent at $1,275.60 an ounce by 1:55 p.m. EST (1855 GMT). It touched $1,288.34 on Thursday, its highest since Oct. 20 and was on track for a 0.5 percent weekly rise.

U.S. gold futures for December delivery settled down $13.30, or 1 percent, at $1,274.20 per ounce, a 0.4 percent weekly rise.

The dollar was set for its first weekly fall in a month as disappointment that a landmark U.S. tax overhaul may be delayed until 2019 put a brake on the currency's recent rally. [FRX/]

Uncertainty over the tax plans also hit U.S. stock markets and helped end the longest run of global share price gains since 2003. Expectations of lower taxes, one of President Donald Trump's key promises, have helped power the S&P more than 20 percent since the 2016 presidential election. [MKTS/GLOB]

Political or economic uncertainty often prompts investors to buy gold to protect their assets from declining yields, since gold is a non-yielding commodity.

Further share price falls would likely increase the price of gold, said Saxo Bank analyst Ole Hansen.

In other precious metals, silver was down 0.6 percent at $16.89 per ounce, yet on track for a 0.4 percent gain this week, its first weekly rise in four weeks.

Platinum was down 0.8 percent at $929.40 an ounce after hitting $941.40, the highest since Oct. 16. It was set for a weekly gain of 1.2 percent.

Palladium was down 1.6 percent at $994.22 an ounce after touching its highest since 2001 at $1,026.10 on Thursday and was down 0.3 percent for the week.


(Additional reporting by Vijaykumar Vedala and Arpan Varghese in BENGALURU; Editing by Elaine Hardcastle and Susan Thomas)