Gold slides to 2018 low as dollar strengthens

LONDON (Reuters): Gold slid to a fresh low for the year on Thursday as another rise in U.S. bond yields and concerns over political risk in Italy held the dollar index near its 2018 peak.

The precious metal has fallen more than 2% this week on gains in the U.S. currency and a rise in U.S. 10-year Treasury yields to seven-year highs. Higher yields increase the opportunity cost of holding non-yielding assets such as bullion. Spot gold  was down 0.1% at $1,289.34 an ounce by 1450 GMT, off an earlier 4-1/2 month low of $1,285.41. U.S. gold futures for June delivery were down $2.80 at $1,288.70. 

The dollar has climbed nearly 4% this quarter on expectations that the Federal Reserve will lift U.S. interest rates further this year to curb inflation, at a time when other central banks are still keeping monetary policy loose. 

The euro remains under pressure, hovering near a five-month low on concerns that political developments in Italy could cause wider disruption in the common currency bloc.

Political uncertainty arising out of North Korea after Pyongyang threatened to pull out of a meeting with the United States was likely to limit downside for gold, analysts said. But that was not enough to offset other factors. 

From a technical perspective, gold prices were looking vulnerable to further losses after breaking below key chart levels this week, according to analysts who study past price moves to determine the future direction of trade.

 “Gold has eroded key support, namely the 200-day moving average, the $1,302.74 March low and the 50% retracement (of the December-to-January rally),” Commerzbank said in a note on technicals. “We have been forced to neutralise our outlook as the market is now on the defensive.”