Gold prices are falling on Monday after recent gains. By the time of writing this article, the price of the April gold futures dropped by 0.4%, to $1,725 per troy ounce. May silver futures fell 1.22%, to $24.808 an ounce.
The main factor behind the decline is the high value of the US dollar, which is approaching a four-month high today. A little more, and the dollar will reach a fatal peak against the euro. The lack of demand for more risky currencies is due to the stronger economic outlook for the United States, as well as the speed up vaccinations among the American population. It is expected that the United States will recover much faster from the coronavirus crisis than European countries, where restrictive measures have tightened, and the timing of vaccination has noticeably shifted. Investor concerns about the spread of a new strain of coronavirus also contributed to the fact that the US dollar was able to rise against the Australian and New Zealand dollars, as well as against the pound sterling.
As we can see in the dollar index chart, the quotes of the US dollar against a basket of six other major currencies rose by 0.06% today, to the level of 92.79. By the way, this indicator is slightly below the four-month high of 92.86 points, which was reached by the dollar the day before.
The pressure on gold is also exerted by the increase in the yield of US government bonds, which significantly restrains the growth of its value. In mid-March, the yield on US Treasuries surged above 1.75%, the highest since January 2020. Later, this indicator decreased slightly, consolidating near 1.65%. According to Michael McCarthy, Chief Market Strategist at CMC Markets, profitability in the short term poses a significant threat to gold. If the bond sell-off gains momentum, gold risks sinking below $1,700.
It should be noted that the price of precious metal for almost the entire second half of March is in the range of $1,720-$1,750.