Gold gets a bump from softer dollar and bond yields

Bengaluru — Gold prices consolidated at the key $1,800 level on Thursday, supported by softer US bond yields and dollar as investors focused on how central banks respond to rising price pressures.

Spot gold rose 0.2% to $1,800.13/oz by 4.53am. US gold futures gained 0.2% to $1,802.00.

Benchmark 10-year US treasury yields steadied close to a two-week trough, decreasing the opportunity cost of holding non-yielding bullion.

Adding to gold’s support, the dollar index fell 0.1%. A weaker dollar makes dollar-denominated gold cheaper for holders of other currencies.

“We’re seeing some more buyers being drawn into the gold market and that’s partly around the narrative of higher prices,” said Nicholas Frappell, global GM at ABC Bullion.

Investors now await the European Central Bank (ECB) policy meeting due later in the day, followed by the US Federal Reserve meeting on November 3.

Market participants also took stock of the Bank of Japan retaining its easy monetary policy and projecting inflation at well below its target for at least the next two years.

Gold is often considered an inflation hedge, though reduced stimulus and interest rate hikes push government bond yields up, denting gold’s appeal.

“Gold’s supportive backdrop is waning as the Fed is getting closer to a tapering decision from November and rate hikes from mid-2022,” ANZ analysts said in a note.

“Negative real yield and inflation risks will help prices to move to $1,850/oz before retreating next year and beyond.”

Demand for gold fell in the third quarter to its lowest since the last quarter of 2020, the World Gold Council (WGC) said.

WGC, however, expects physical demand in large consumer India to strengthen in the fourth quarter.

“Physical demand is pretty good but gold’s support will likely be much more contingent on the degree and strength of investor demand,” ABC Bullion’s Frappell said.

Spot silver was flat at $24.05/oz. Platinum gained 0.1% to $1,011.67 and palladium rose 0.6% to $1,974.90. 

Reuters