Gold hits seven-week low as dollar firms, Treasury yields climb

By Jan Harvey

LONDON (Reuters) - Gold slid to a seven-week low on Monday as the dollar pared losses after its worst quarterly performance in seven years and 10-year U.S. Treasury yields climbed, weighing on appetite for non-interest bearing bullion.

Gold ended June with its first monthly loss of the year after the strength it saw in early 2017 ran out of steam in the second quarter, dampened by a rise in bond yields.

Spot gold was down 0.5 percent at $1,235.26 an ounce at 0935 GMT, while U.S. gold futures for August delivery were up $7.40 an ounce at $1,234.90.

The metal ran into chart support at $1,234 an ounce, its 200-day moving average. It rallied $50 an ounce to a near seven-month high in the three weeks after breaking above that level in May, but has declined steadily ever since.

"On dollar-priced gold, we are currently testing the 200-day moving average," Saxo Bank's head of commodity strategy Ole Hansen said. "The political front is likely to attract continued demand, but (that is) currently not strong enough to offset the impact of rising yields."

European shares began the new quarter with solid gains, while the dollar lifted from nine-month lows as U.S. Treasury yields hit their highest since mid-May.

Germany's 10-year government bond yield pulled back after last week's sharp selloff, but held near 3-1/2 month highs.

Gold failed to benefit from dollar weakness in the second quarter, as this was driven largely by expectations for tightening monetary policy outside the United States.

"Higher global rates would weigh on gold - as we have highlighted on several occasions, the potential for higher EUR rates and the upward pressure this might have globally is a key risk that we are watching," UBS said in a note.

"Ahead today, U.S. inflation data comes into focus given the read-through to real rates."

U.S. Mint sales of American Eagle gold coins totalled 6,000 ounces in June, down 92 percent from June 2016 and bringing the tally for the first half of the year to 192,500 ounces.

Silver was down 0.1 percent at $16.55 an ounce. Silver was the worst performer of the major precious metals in the second quarter, ending the period down 9 percent.

Palladium, the last quarter's biggest riser with a near 6 percent gain, was up 0.1 percent at $842.65 an ounce, while platinum was 0.2 percent lower at $919.20 per ounce.

(Reporting by Jan Harvey; additional reporting by Nithin Prasad and Koustav Samanta in Bengaluru; editing by Susan Thomas)