Gold prices fell for a third day yesterday to their lowest since mid-March after strong economic data in the United States and Germany bolstered expectations that central banks will raise interest rates.
Gold is highly sensitive to rising rates because they push up bond yields, increasing the opportunity cost of holding non-yielding bullion. They also tend to boost the dollar, in which gold is priced.
Spot gold , which dropped 2.3 percent last week, was down 0.3 percent at $1,209.47 an ounce, having earlier touched $1,204.45, its lowest since March 15.
US gold futures for August delivery were 0.1 percent down at $1,209 an ounce. “On the mind of the gold market is central bankers striking a more hawkish tone. Investors are now pricing in monetary tightening from most central banks,” said Danke Bank analyst Jens Pedersen.
The rationale for tightening was bolstered by better than expected US jobs data and strong German export figures.
These also fuelled optimism about the global growth outlook, boosting stock markets and the dollar, encouraging investors to ditch gold for riskier assets.
Markets were looking ahead to Wednesday and Thursday, when US Federal Reserve Chair Jant Yellen will address Congress.
US 10-year bond yields have risen sharply since late June are near two-month highs, nearly 7 percent from a high of $1,295.97 a month ago. Investors have sharply scaled back bets on higher prices.
