Surging US Treasury yields weighed on gold. The precious metal dropped by 0.3% to $1,738.12 per ounce on Monday. Gold futures decreased by 0.4% to $1,737.70 per ounce.
In the first quarter of 2021, gold has suffered the most significant price drop since 2016. It is one of the few commodities trading below the numbers they traded last year.
However, the metal still has upside potential even as the world economy recovers and the pandemic nears its end.
Demand for the yellow metal dropped in Western countries
Frederic Panizzutti, head of institutional relations and central banks at the MKS refinery, said that gold had played its typical role of haven against market instability.
The metal appreciated about 25% in 2020, its most considerable annual increase in the last decade. However, so far, in 2021, the price has fallen 8%, after recovering slightly from the 9.5% drop in the first quarter of 2021.
Kevin Rich, a metals analyst at the Australian Perth Mint, stated that since March 2020, there was significant demand for gold in the US and Europe. It drove the price higher. However, collapse in demand in Asian countries sold gold at discounts.
On the other hand, this year the opposite effect has taken place. Demand in western countries has reduced, and prices fell despite the recovery in demand in the Asian market.
The fall in the price of gold has mostly been attributed to the rise of the dollar and the US 10-year Treasury bonds.
Federal Reserve Chair Jerome Powell hoped that inflation and employment would accelerate in the coming months. Still, there are dangers that a hasty reopening leads to a continuing uptick in coronavirus cases.
What is the outlook for gold?
Analysts believe that the precious metal price could rise again if capital markets calm and volatility increases. Interest rates growing faster than markets expect, the Fed withdrawing its support or faster-tan-expected inflation growth could support gold prices.
The dollar index increased by 0.1% against rival currencies. It made gold high-priced for holders of other currencies.
As for other metals, silver dropped by 0.4% to $25.13. Also, palladium and platinum prices experienced falls. Palladium slipped by 0.3% to $2,630.78 and platinum lost 0.6% to $1,191.87.
Asia Pacific shares dropped this morning. The markets were forecast to open higher. However, they are trading lower while the dollar is winning the race.