Metals Stocks: Gold pulls back after flirting with $1,600 as dollar and government bond yields gain altitude

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Gold futures headed lower Monday morning as U.S. equities partially bounced back from a coronavirus-triggered selloff, while the U.S. dollar and government bond yields rose.

A rise in the U.S. dollar DXY, +0.45%, gains in the Dow Jones Industrial Average DJIA, +1.26% and the S&P 500 index SPX, +1.23%, as well as a climb in rates for the 10-year Treasury note TMUBMUSD10Y, +4.08% yield to 1.54% helped to weigh on bullion prices, which tend to weaken when the buck strengthens and stocks rally.

Gold also competes with bond rates for haven buyers, with rising yields tending to attract investors in Treasurys and away from precious metals.

China’s National Health Commission on Sunday said cases of the novel coronavirus reached 17,205, while the death toll hit more than 360. Cases have also been reported outside the country, with the World Health Organization and Trump administration last week declaring an public health emergencies.

The Asian influenza, that has drawn comparisons to the SARS, severe acute respiratory syndrome, is expected to hurt near-term economic expansion in China, which is considered one of the biggest buyers of precious and industrial metals.

Still, gold has been mostly a beneficiary of the recent worries tied to the Asian outbreak and its potential to hurt the global economy, if only on a short-term basis.

“The price of gold jumped $15.79 or 1.0% on Friday with the flight to safety propelling gold to its best month in five,” said Jasper Lawler, head of research at London Capital Group.

“But on Monday gold is lacking follow-through to take it to new seven-yearh highs,” he wrote.

Read: Why the ‘simplest hedge is best’ as coronavirus fears take toll on stocks

Gold for April delivery GCJ20, -0.51%  on Comex was down $5.10, or 0.3%, to $1,582.80 an ounce and had drifted up to an intraday peak near $1,600, touching $1,598.50, according to FactSet data, extending its climb to the highest level since 2013.

The move for bullion comes after the most-active April contract saw weekly climb of 0.6%, and a rise of about 3.8% for the month. The settlement level also marked the highest weekly price finish since March 2013.

The People’s Bank of China has injected $1.2 trillion yuan ($173 billion) into local money markets, to soften the shock from the coronavirus, among several measures enacted to help curtail sharp declines in China’s main indexes, including the Shanghai Composite Index SHCOMP, -7.72%. China markets had been closed since Jan. 24 due to an extended Lunar New Year holiday.

Chinese regulators also urged banks and other financial institutions to boost lending and avoid calling in debts in areas severely affected by the pandemic.

March silver SIH20, -1.70%  shed 25 cents, or 1.4%, to $17.77 an ounce, after closing Friday with a 0.1% advance, with the most-active contract finishing with a gain of 0.5% in January.

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