• Gold prices turned lower on Friday as U.S. Treasury bond yields rose, but losses were limited by weaker stock markets and the dollar, which fell due to uncertainty over U.S. tax reform.
• A rise in U.S. bond yields pressures gold by reducing the attractiveness of non-yielding bullion, while a weaker dollar makes bullion cheaper for holders of other currencies.
"A higher yield tends to increase the cost to carry gold, and we had a little uptick in the yield curve slope," said Bart Melek, head of commodity strategy at TD Securities in Toronto.
• Two-year yields were at a nine-year high as traders closed out curve-flattener positions and dealers reduced their holdings of longer-date debt following this weeks auctions.
• Spot gold was down 0.7 percent at $1,275.60 an ounce by 1:55 p.m. EST (1855 GMT). It touched $1,288.34 on Thursday,its highest since Oct. 20 and was on track for a 0.5 percent weekly rise.
U.S. gold futures for December delivery settled down $13.30, or 1 percent, at $1,274.20 per ounce, a 0.4 percent weekly rise.
• The dollar was set for its first weekly fall in a month as disappointment that a landmark U.S. tax overhaul may be delayed until 2019 put a brake on the currency's recent rally.
• Uncertainty over the tax plans also hit U.S. stock markets and helped end the longest run of global share price gains since 2003. Expectations of lower taxes, one of President Donald Trump's key promises, have helped power the S&P more than 20 percent since the 2016 presidential election.
• Political or economic uncertainty often prompts investors to buy gold to protect their assets from declining yields, since gold is a non-yielding commodity.
• Further share price falls would likely increase the price of gold, said Saxo Bank analyst Ole Hansen.
• In other precious metals, silver was down 0.6 percent at $16.89 per ounce, yet on track for a 0.4 percent gain this week, its first weekly rise in four weeks.
• Platinum was down 0.8 percent at $929.40 an ounce after hitting $941.40, the highest since Oct. 16. It was set for a weekly gain of 1.2 percent.
• Palladium was down 1.6 percent at $994.22 an ounce after touching its highest since 2001 at $1,026.10 on Thursday and was down 0.3 percent for the week.
• Mysterious Gold Trades of 4 Million Ounces Spur Price Plunge
Trades that moved about 4 million ounces of gold in a matter of minutes awakened the precious metal from its slumber.
After 11:10 a.m. on the Comex in New York almost 40,000 contracts, each representing 100 ounces of the metal, traded in a span of 10 minutes. That triggered a sell-off, sending prices down as much as 1.1 percent.
The trades jolted the market, which has seen 60-day historical volatility languishing near the lowest since 2001. The metal has struggled to sustain the pace of gains from earlier this year as the outlook for rising U.S. borrowing costs curbs demand for non-interest-bearing assets like gold.
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“We didn’t see any headlines, any news to make gold drop $10, but it just did,” Miguel Perez-Santalla, a sales and marketing manager at Heraeus Metals New York LLC, said by telephone. “It’s going with someone who has a huge position that can trigger stops and make the market move in a direction.”
The trades accelerated a market exodus. In the half hour ended 11:30 a.m. volume reached 63,384 contracts. Futures for delivery in December settled 1 percent lower at $1,274.20 an ounce at 1:46 p.m. If the mysterious trades within that half hour were paid at the settlement price (which was unlikely), they would have been worth more than $8 billion.
The bullion market has seen similar mysterious trades in the past few months.
Last month, contracts covering more than 2 million ounces of gold traded in just five minutes, sending prices higher. Two months earlier, contracts for a similar amount traded in a minute, propelling the metal higher. In June, the market saw trades for over 1.8 million ounces posted in just a minute.
Reference: Reuters, Bloomberg
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