Gold futures edged lower Monday as investors kept an eye on the U.S. dollar and Treasury yields.
Gold for August delivery was down $4.50, or 0.2%, at $1,887.50 an ounce on Comex. July silver fell 20.1 cents, or 0.7%, to $27.695 an ounce.
The dollar was mixed versus major rivals, with the ICE U.S. Dollar Index a measure of the currency against a basket of six major rivals down 0.1%. A weaker dollar can be a positive for commodities priced in the currency, making them less expensive to users of other currencies.
But the yield on the 10-year Treasury note edged up 3 basis points to 1.583%. Yields and bond prices move in opposite directions. Higher bond yields raise the opportunity cost of holding gold and other nonyielding assets.
Both the dollar and yields fell significantly after a disappointing May jobs report on Friday, helping gold almost to regain the $1,900-an-ounce level, said Carsten Fritsch, analyst at Commerzbank, in a note.
Fritsch argued that inflation worries, which he expects to be underlined by Thursday’s release of the May consumer-price index, to increase.
Signs of mounting inflationary pressures “could prompt the Fed to reduce its bond purchases sooner. We expect this to happen from the fourth quarter,” but won’t entail a rise in interest rates, Fritsch sad.
“Nominal yields will therefore remain well below the inflation rate for some considerable time, leaving real interest rates significantly negative. This is a strong argument in favor of a rising gold price,” he argued.