* Dollar hits three-month peak against rivals
* U.S. 10-year Treasury yield hits lowest since February
* Stagflationary environment could help gold, analyst says (Updates prices and adds comment)
July 19 (Reuters) – Gold moved a bit lower in choppy trading on Monday as the precious metal was caught between a buoyant U.S. dollar and a slump in Treasury yields to their lowest levels since February.
Spot gold was down 0.2% to $1,807.67 per ounce by 11:54 a.m. EDT. U.S. gold futures dropped 0.5% to $1,806.50. “Gold is caught in a tug-of-war between a rising dollar that weighs down on the precious metal and a drop in risk appetite, which supports it’s price,” said Ricardo Evangelista, a senior analyst at ActivTrades.
A stronger dollar, which hit more than a three-month high, drove gold to a one-week trough earlier in the session and countered a sharp fall in U.S. benchmark Treasury yields.
Jeffrey Christian, managing partner at CPM Group, also attributed gold’s recent declines to seasonal weakness in investment and jewellery demand.
“A lot of investors are looking at gold and saying gold spiked to a record high in early August last year and it hasn’t come close to regaining the high since then, so there is what we call stale bull liquidation.”
Sentiment in riskier markets was bruised by investors’ fears over a relentless surge in coronavirus cases, which forced many Asian countries into imposing lockdowns, and growing inflationary pressures.
“Stagflation could become a really interesting element if we keep seeing slowing economic growth coupled with some inflationary fears,” said Jim Wyckoff, senior analyst with Kitco Metals.
“Theoretically, stagflation should be bullish for gold because you’ve got rising inflation, which suggests investors are going to look at hard assets including gold and slowing economic growth, which might put in a safe-haven bid.”
The focus now turns to next week’s Federal Reserve and European Central Bank meetings.
Elsewhere, silver slipped 2% to $25.14 per ounce, platinum shed 2.4% to $1,076.10 and palladium fell 0.7% to $2,612.50. (Reporting by Nakul Iyer and Arundhati Sarkar in Bengaluru; Editing by Steve Orlofsky and Paul Simao)
