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James Hyerczyk
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Gold futures are trading sharply lower on Friday, pressured by rising Treasury yields and a stronger U.S. Dollar. The moves are likely being fueled by profit-taking ahead of the weekend, but some are saying that robust economic data from China boosted hopes of a swift recovery. A fast paced recovery will bring central banks closer to lifting their current easy monetary policy, which would pressure gold prices.

At 13:36 GMT, June Comex gold futures are trading $1737.10, down $21.10 or -1.20%.

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Gold futures are falling after hitting its highest level since March 1 the previous session. Despite today’s early weakness, the market is still set to rise more than 1% on the week as Treasury yields and the U.S. Dollar pulled back from recent highs.

Treasury Yields Climb as US Producer Prices Jump

U.S. Treasury yields climbed on Friday after the March producer price index, which measures wholesale price inflation, showed a larger-than-expected increase.

The March PPI data showed a rise of 1.0%, compared with a projected rise of 0.4% from economists surveyed by Dow Jones. The majority of the increase came from a jump in prices for final demand goods, the U.S. Bureau of Labor Statistics said.

Economists and Federal Reserve officials have repeatedly warned that inflation data will show rising prices in the spring and summer months as the economy reopens and rebounds from the pandemic, but the increases could prove temporary and may not be a cause for concern.

Gold prices tend to weaken when yields rise because bullion doesn’t pay interest or a dividend to hold it. Rising yields also drive up demand for the U.S. Dollar. Since gold is dollar-denominated, it tends to weaken when the dollar rises.

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China Factory Gate Prices Rise by Most in Nearly 3 Years as Economic Recovery Quickens

China’s factory gate prices beat analyst expectations to rise at their fastest annual pace since July 2018 in March in the latest sign that a recovery in the world’s second-largest economy is gathering momentum.

China’s producer price index (PPI) rose 4.4% in annual terms, the National Bureau of Statistics (NBS) said in a statement, far above a 3.5% rise forecast in a Reuters poll and up sharply from a 1.7% increase in February.

Gold traders are concerned that the rapid economic recovery will lead China’s central bank to tighten policy sooner than expected.

For a look at all of today’s economic events, check out our economic calendar.
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