“Rising inflation expectations as markets price in the reopening of developed market economies are pushing yields higher and pressuring gold,” OANDA senior market analyst Jeffrey Halley told Reuters.
Higher inflation normally boosts gold’s appeal as a safe haven asset, but it also lifts treasury yields, which in turn increase the opportunity cost of holding non-yielding bullion.
“The overall picture looks dire, gold is now in danger of a material move lower, if yields rise again,” Halley added.
Reflecting investor sentiment, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell to their lowest since May 2020. It is estimated that $1.5 billion of funds had been withdrawn from the ETF within the span of one week.
(With files from Reuters)
