Gold gallops higher amid softer dollar and geopolitical tension

Bengaluru — Gold prices rose on Wednesday as a pullback in the dollar and China-US tension helped to counter pressure from a rise in US treasury yields after hawkish comments from Federal Reserve officials on interest rate hikes.

Spot gold was up 0.4% at $1,766.59/oz, at 3.09am GMT. On Tuesday, bullion rose to an almost one-month high of $1,787.79 before closing down 0.6% on the day.

US gold futures slipped 0.5% to $1,780.80/oz. The dollar fell 0.2% against its rivals after rising 0.8% overnight, making greenback-denominated gold less expensive for other currency holders.

“Gold tested resistance around $1,785/oz-$1,790/oz level overnight and got rejected ... Also, the markets have become a little bit more sceptical about reversal of tightening from the Fed,” said Ilya Spivak, a currency strategist at DailyFX. “We also need to keep an eye on the Taiwan situation now, at times of geopolitical concerns gold does tend to find a bit of an appeal,” he added.

A trio of Fed policymakers signalled on Tuesday that there would be no let up in the tightening campaign aimed at taming the highest inflation since the 1980s, even though it will take rates to a level that will more significantly curb economic activity.

These remarks lifted benchmark US 10-year treasury yields to 2.774% overnight and were about 2.71% in Asian session.

Though gold is considered a hedge against inflation, rising US interest rates reduce the appeal of non-yielding bullion. Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.3% to 1,002.97 tonnes on Tuesday.

Meanwhile, US House of Representatives speaker Nancy Pelosi addressed Taiwan’s parliament on Wednesday and was due to meet its president as well as human rights activists during a visit to the island that has infuriated Beijing.

Spot silver fell 0.2% to $19.91/oz, platinum gained 0.2% at $895.52, and palladium rose 1.2% to $2,087.66.

Reuters