Gold dips as Treasury yields rise on housing starts

Key Points
  • Gold in narrow range in last quarter of 2017
  • Biggest ETF reports 7.1-ton outflow on Monday
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Gold dipped on Tuesday as U.S. Treasury yields rose on an uptick in housing starts for November and even though the dollar fell, a factor that generally supports gold. Market players were wary of taking new positions before the holiday season. Gold is on track to post its narrowest trading range of any quarter in a decade in the last three months of the year.

Spot gold was down 0.04 percent at $1,260.86 an ounce high of $1,265.20, while U.S. gold futures futures for February delivery settled down $1.30, or 0.1 percent, at $1,264.20 per ounce. U.S. Treasury yields hit session highs and the yield curve steepened as U.S. housing starts unexpectedly rose in November.

"That prompted rates to move higher and the U.S. dollar was up as a result," but edged lower later, said Bart Melek, head of commodity strategy at TD Securities in Toronto.

Higher bond yields make non-yielding bullion less attractive to investors. They also tend to boost the U.S. dollar, but "investors are adjusting positions ahead of the holiday weekend, so there's some ambiguity right now," Melek said. Caution about pending U.S. tax legislation pressured the dollar, traders said. Congress appeared all but certain to pass the bill.

World stocks dipped with investors taking profits after recent highs in the tech sector before Republican lawmakers achieve their goal of passage. The dollar eased against the euro, as investors were cautious about how much the tax reforms, if passed, would boost the U.S. economy.

"The (gold) market is trying to move higher ... (as) the euro/dollar is trying to move above $1.18 again," ABN Amro analyst Georgette Boele said, though she added that moves were still relatively small. "Liquidity is drying up a bit."

Holdings of the world's largest gold-backed exchange-traded fund, New York-based SPDR Gold Shares , fell 7.1 tonnes on Monday, their largest one-day outflow since late July, cutting its inflow for the year to 15 tonnes.

Among other precious metals, silver was down 0.5 percent at $16.05 an ounce, after seeing a two-week high of $16.22.

Platinum was up 0.8 percent at $914 an ounce, earlier hitting a two-week high of $919.40. The metal has rallied nearly $30 an ounce in the last two trading sessions.

Palladium was up 0.6 percent at $1,023.95 an ounce.