Firmer Treasury Yields, Rising U.S. Dollar Pressure Gold Prices

The stronger U.S. Dollar and prospects for another rate hike helped gold edge lower on Friday. The market was headed for a fifth straight weekly decline. Gold is also being pressured by rising U.S. Treasury yields and U.S. equity prices that are hovering near all-time highs.

Spot Gold was trading $1160.69, down $6.910 or -0.59%.

In U.S. economic news, Preliminary University of Michigan Consumer Sentiment came in at 98.0, better than the estimate and previous report. Preliminary University of Michigan Inflation Expectations was 2.3%. Final Wholesale Inventories was unchanged at 0.4%.

Crude Oil

Crude oil prices rose over one-percent on Friday, but the range was tight. The move was triggered by optimistic buyers, hoping that non-OPEC producers meeting in Vienna over the week-end would agree to cut production to shore up concerns over OPEC’s original agreement to fix production. The strong U.S. Dollar helped limited crude oil gains.

Oil is set to finish the week higher, but about 2 percent below its recent highs. Traders are worried about the size of the proposed production cuts. The concerns are not about a collapse of the deal, but whether they will be big enough to start trimming the supply glut.

This afternoon, oil services firm Baker Hughes reported its count of oil rigs operating in U.S. fields rose by 21 to 498, marking the sixth straight week of increases. At this time in 2016, the rig count stood at 524.

North Sea Brent crude for February was trading $54.18, up $0.29. U.S. West Texas Intermediate crude for January settled at $51.50, up $0.66 or 1.3%.

Forex

The U.S. Dollar picked up strength again, driven higher by the Euro and the Japanese Yen. The Euro was under pressure for a second day as investors continued to react to the European Central Bank’s plans to extend its bond-buying program longer than the market had anticipated. It did, however, reduce the size of its monthly purchases. The USD/USD rose to 115.27, its highest level since February 9.

Both the Yen and the Euro are funding currencies because of Japan’s and the Euro Zone’s negative interest rates. They tend to weaken when there is demand for higher risk assets.

U.S. Treasurys

The dollar was underpinned by rising Treasury yields, which made it a more desirable investment. The yield on the benchmark 10-year Treasury notes was up to around 2.4611 percent. The 30-year Treasury bond was yielding 3.1558. The better than expected Consumer Sentiment data helped pressure T-notes and T-bonds, underpinning yields.

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