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Gold Steadies After Worst Month in Four Years as Yields in Focus

A worker holds a handful of gold bullion granules during manufacture at the Rand Refinery Ltd. plant in Germiston, South Africa, on Wednesday, Aug. 16. 2017. Established by the Chamber of Mines of South Africa in 1920, Rand Refinery is the largest integrated single-site precious metals refining and smelting complex in the world, according to their website.

Gold steadied after its biggest monthly slump since late 2016 as investor focus remained on bond yields and the outlook for growth.

Last week’s sell-off in global bonds stabilized after central banks from Asia to Europe moved to calm a panic that had sent Treasury yields to their highest level in a year. Bets on accelerating inflation are raising concerns that there could be a pullback in monetary policy support despite assurances from the Federal Reserve that higher yields reflect economic optimism for a solid 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.”

Gold steadies after biggest monthly slump since late 2016

Bullion’s had a rocky start to the year as the higher Treasury yields weighed on demand for the non-interest-bearing metal and as the roll-out of vaccinations worldwide spur 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.

Spot gold rose 0.4% to $1,741.55 an ounce by 9:14 a.m. in Singapore after slumping 2.1% on Friday. That brought the loss in February to 6.2%, the most since November 2016. Silver, platinum and palladium all climbed. The Bloomberg Dollar Spot Index fell 0.2%.

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