Gold retreats as dollar, yields firm on strong U.S. data

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Gold prices on Wednesday retreated from a near five-month high scaled in the previous session, as the U.S. dollar and Treasury yields firmed on the back of robust manufacturing data.

Spot gold was down 0.2% at $1,895.58 per ounce, as of 0914 GMT, after hitting its highest since Jan. 8 at $1,916.40 on Tuesday.

U.S. gold futures eased 0.3% to $1,898.80.

The firmer dollar is weighing on gold, and “we’re probably seeing some profit-taking,” Commerzbank analyst Daniel Briesemann said.

“Many market players have opened long positions in gold in the last few weeks, as can be seen by the CFTC statistics. But now it appears that at least some of these positions have been closed again, keeping gold in check,” Briesemann added.

Making gold more expensive for investors holding other currencies, the dollar index rose on data that showed a pick-up last month in U.S. manufacturing activity.

The U.S. 10-year Treasury yields held firm, increasing the opportunity cost of holding bullion, which pays no interest.

However, Commerzbank’s Briesemann said bottlenecks in the supply chain and rising commodity prices could limit U.S. manufacturing growth potential, and that the Federal Reserve is paying attention to labor market data.

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Investors were also awaiting U.S. payrolls data due on Friday to gauge cues on future monetary policy.

“As for the precious metals’ outlook in the short-term, it depends on how global inflation data develops and how central banks, mostly the Fed, respond to it,” IG Market analyst Kyle Rodda said.

Gold, considered a hedge against inflation, clocked in May its best month in 10, driven by a weaker dollar and recent data showing a rise in prices in the U.S. and Britain.

On the physical front, Australia’s Perth Mint posted a 10% drop in May gold coin sales.

Elsewhere, palladium fell 0.8% to $2,837.91 per ounce, silver dropped 0.8% to $27.69, and platinum slipped 0.8% to $1,182.03. (Reporting by Arundhati Sarkar and Brijesh Patel in Bengaluru, Editing by Sherry Jacob-Phillips)

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