Gold gains as dollar slips

Bengaluru — Gold prices rose on Wednesday as the US treasury yields and the dollar eased, with investor focus shifting to key inflation data due this week that could influence the Federal Reserve’s decision to taper its stimulus at a faster pace.

Spot gold was up 0.2% at $1,788.33/oz, at 3.52am GMT. US gold futures were up 0.3% at $1,789.50.

Boosting bullion’s appeal, benchmark 10-year and 30-year US treasury yields retreated from a one-week high hit on Tuesday while the dollar index weakened 0.2%.

Lower yields reduce gold's opportunity cost while a weaker dollar decreases bullion’s cost for holders of other currencies.

Bullion prices also got a lift after US President Joe Biden threatened to impose “strong economic and other measures” on Russia if it invades Ukraine.

Gold, viewed as a safe-haven asset, tends to benefit from economic and political uncertainty.

“We’ve got this geopolitical issue bubbling in the background and that’s driving a small bid in gold. But there’s not a lot of fervour in the move and any breakout of the $1,770-$1,810 range ultimately hinges on the Fed’s decision next week,” Stephen Innes, managing partner at SPI Asset Management.

Investors also eyed Friday’s US consumer price index (CPI) report, which could have a bearing on decision the Fed takes in its policy meeting on December 14-15.

“Negative real interest rates could keep gold near $1,800 in the first half of 2022, but more downward pressure is likely to build after the Fed starts hiking interest rates in mid-2022,” ANZ analysts said a note, adding that it expects gold to touch $1,600/oz by this year-end.

Reduced stimulus and interest rate hikes tend to push government bond yields higher, raising the opportunity cost of holding gold, which bears no interest.

Spot silver rose 0.1% to $22.49/oz. Platinum gained 1.1% to $961.55 and palladium added 0.1% to $1,855.18.

Reuters