PRECIOUS-Gold rally takes a pause amid high U.S. Treasury yields

BY Reuters | TREASURY | 04/16/24 06:03 AM EDT

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Bullion hit all-time high of $2,431.29 per ounce on Friday

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10-year Treasury yields are close to a five-month high

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Citi expects gold to regularly test $2,500/oz in H2

(Recasts, updates prices, adds analyst comment and changes dateline to London)

By Polina Devitt

LONDON, April 16 (Reuters) - Gold prices fell on Tuesday amid high U.S. Treasury yields, though safe-haven demand amid concerns over rising geopolitical tensions kept the metal relatively close to its record high hit last week.

Spot gold was down 0.5% to $2,370.45 per ounce by 0947 GMT. The metal rose 1.7% on Monday and touched an all-time high of $2,431.29 on Friday.

The yield on 10-year Treasury notes was last at 4.65%, having surged to a five-month high of 4.66% on Monday as the U.S. retail sales increased more than expected in March. This prompted the market to increase bets on fewer U.S. rate cuts in 2024.

"Although the long-term correlation between the two (gold and the Treasury yields) seems to have been abandoned, over the short term it still influences," said independent analyst Ross Norman. "Higher-for-longer is one of the biggest headwinds in an otherwise very positive landscape for gold."

Gold is up 15% so far this year after its March-April rally amid rising inflation expectations, geopolitical tensions in the Middle East and continuing strong purchases by central banks.

"This gold rally looks far from done. The mystery buyer is clearly showing deep conviction and there is a sense that fresh all time highs will be revisited soon. The current market pause is a welcome break as consolidation strengthens what might be to follow," Norman added.

Analysts at Citi expect gold to regularly test and breach $2,500 in the second half of 2024 and to hit $3,000 per ounce over the next 6-18 months.

"The euphoric sentiment and the positioning in the futures market suggest that the rally is self-supporting," said Julius Baer analyst Carsten Menke.

Spot silver fell 1.9% to $28.33 per ounce, platinum lost 0.3% to $966.60, and palladium was down 2.3% to $1,011.50.

(Reporting by Polina Devitt in London; additional reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Tasim Zahid)

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