Gold steady as stronger Dollar, yields counter Ukraine woes

A stronger dollar makes gold less attractive for other currency holders, while higher yields increase the opportunity cost of holding non-paying bullion.

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New York: Gold prices were steady on Monday as the dollar and Treasury yields firmed following a solid U.S. payrolls report that raised expectations of aggressive rate hikes, while a worsening Ukraine crisis supported safe-haven bids for bullion.

Spot gold was little changed at $1,925.97 per ounce. U.S. Gold futures were up 0.3% to $1,929.70.

“While the conflict in Eastern Europe may be providing a modest tailwind to gold prices on dips, it is very clear now that the main pricing inputs into gold have swung to the impact of higher U.S. yields and a higher U.S. dollar,” said OANDA senior analyst Jeffrey Halley adding that Asia trade was muted on account of a China holiday.

A stronger dollar makes gold less attractive for other currency holders, while higher yields increase the opportunity cost of holding non-paying bullion.

The dollar made a firm start to the week while Treasury yields were also higher, as the monthly U.S. jobs report indicated a strong labor market and is likely to keep the Federal Reserve on track to maintain its hawkish policy stance.

U.S. job data showed the unemployment rate falling to a new two-year low of 3.6% and wages re-accelerating, positioning the Fed to raise interest rates by a hefty 50 basis points in May.

Investors are looking forward to any discussion of a 50 basis point rate hike when the Fed releases minutes from its March meeting on Wednesday.

Meanwhile, Germany’s defence minister said on Sunday the European Union must discuss banning imports of Russian gas, after Ukrainian and European officials accused Russian forces of atrocities.

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