Gold catches some slack as dollar pauses for breather
Looming prospect of stimulus tapering by the Fed and further increases in bond yields likely to limit bullion’s appeal
Bengaluru — Gold stabilised on Thursday after two days of losses, helped by a slight pullback in the dollar, but gains were kept in check by expectations that the US Federal Reserve would soon start tapering its monetary support.
Spot gold rose 0.2% to $1,729.26 an ounce by 9.20am GMT. US gold futures were up 0.5% at $1,730.70.
Bullion is being offered some reprieve from the dollar taking a breather, said Han Tan, chief market analyst at Exinity. But heightened prospects for the Fed’s tapering, now widely expected to commence in November, and the chances of Treasury yields continuing to gain are expected to heap more downward pressure on the zero-yielding precious metal, Tan added.
The dollar index paused on Thursday, but expectations that the Fed will start winding down its stimulus this year kept the US currency near its highest in a year, diminishing gold’s appeal for holders’ of other currencies and putting it on course for a 2.2% quarterly dip.
Benchmark US 10-year Treasury yields held above 1.5%, a level not seen since late June. Reduced central bank stimulus and interest rate increases tend to push government bond yields higher, raising the opportunity cost of holding non-yielding gold.
While factors including the US debt-ceiling impasse, rising global inflation and the Evergrande crisis should normally support gold, it remains under pressure from a strong dollar — an alternative safe haven — and rising yields, Ricardo Evangelista, senior analyst at ActivTrades, said in a note.
Silver rose 0.5% to $21.62 per ounce, platinum gained 0.4% to $954.31 and palladium climbed 1.8% to $1,891.02.
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