(Bloomberg) — Gold was steady after posting its biggest drop in six weeks as bond yields surged, with investors bracing for monetary policy tightening in 2022.
Ten-year Treasuries extended their worst start to a year in more than a decade, with rates rising as much as 13 basis points on Monday, the largest first-day jump since 2009, according to Bloomberg data. Higher yields diminish the appeal of non-interest bearing havens like gold.
On Tuesday bullion rose as much as 0.4%, before steadying amid pressure from a stronger dollar.
Gold is starting the year under pressure after its biggest annual decline since 2015, as central banks start to dial back pandemic-era stimulus to fight inflation. Traders are also monitoring the risks posed by the omicron virus variant and will focus this week on the releases of minutes from the Federal Reserve’s latest meeting and the U.S. non-farm payrolls data.
Prices of the precious metal are not expected to free-fall as real rates and yields are set to “remain at a historically low level, very close to zero until the coast is all clear from the strains of Covid-19,” said Avtar Sandu, a senior manager of commodities at Phillip Futures Pte.
Spot gold traded up 0.2% at $1,804.26 an ounce at 1:46 p.m. in London, after dropping 1.5% Monday, the most since Nov. 22. The Bloomberg Dollar Spot Index strengthened after adding 0.5% in the previous session. Silver was little changed, platinum edged higher and palladium advanced.
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