Gold slides to 9-month low as high yields, dollar dull appeal

Gold slumped to a near nine-month low on Friday as higher bond yields and a stronger dollar continued to erode its appeal, with the US Federal Reserve also dampening hopes it could take steps to rein in the soaring yields.

Spot gold was down 0.2% at $1,694.25 per ounce by 1114 GMT, having earlier touched its lowest since June 8 at $1,686.40. It has fallen 2% so far this week.

US gold futures were down 0.5% at $1,691.40 per ounce.

US 10-year rates held above 1.5%, while the dollar rose to three-month highs. Higher bond yields boost the opportunity cost of owning non-yielding bullion.

"Rise in yields is a natural consequence of recovery in economic activities and Powell just confirmed that," said CMC Markets UK's chief market analyst, Michael Hewson.

US Federal Reserve Chair Jerome Powell renewed his promise to keep credit loose on Thursday, saying that while the rise in yields was 'notable', he did not expect that the Fed would have to intervene to push them down.

"If we get decent payroll data that will boost yields even more and gold might see some additional headwinds," Hewson said.

February's US non-farm payrolls report is due at 1300 GMT, with expectations 182,000 jobs were added last month after a rise of 49,000 in January, according to a Reuters poll of economists.

Investors have started to consider that the Fed could think about tightening policy soon then expected, given accelerating vaccine rollouts, another US fiscal package and increasing inflation expectations, said DailyFX currency strategist Ilya Spivak. Silver fell 0.2% to $25.27 an ounce, and was down 5% on the week, its weakest performance since late-November. Palladium was down 0.2% at $2,334.36 and platinum lost 0.8% to $1,117.50.