Gold hardly changed as softer dollar counters risk appetite

Bengaluru — Gold prices were steady on Wednesday, hovering close to the $1,800 psychological level, as a weaker dollar and lower US bond yields countered risk appetite spurred by less-hawkish comments from Federal Reserve officials.

Spot gold was at $1,798.21/oz, at 4.49am GMT. In the previous session, bullion had touched $1,805.43 as investment demand strengthened. US gold futures were down 0.2% to $1,798.60.

“The shift towards a more risk-on approach by investors is probably gold-negative, however, the resultant weakness in the dollar helps gold, and the decrease in US [treasury inflation-protected securities’] yields has provided support for gold,” said Nicholas Frappell, a global general manager at ABC Bullion. "[St Louis Fed president James] Bullard’s comments on the topic of a 50 basis point rise is part of a tendency among Fed officials to soften the markets’ take on the pace and extent of tightening in 2022.”

A noted hawk, Bullard said on Tuesday he would argue for interest rate rises in March, May and June, but did not favour a half-point move.

Though gold is considered a hedge against inflation, rate hikes would raise the opportunity cost of holding non-yielding bullion.

All three Wall Street benchmarks advanced on Tuesday and the energy index closed at a multiyear high, though seesaw trading reflected investor uncertainty about how to play the current market. The dollar index eased off 19-month highs against its rivals, making gold cheaper for other currency holders.

Benchmark US 10-year treasury yields hovered near their lowest levels in a week, with investors pricing in a possibility that the Fed could raise rates as many as five times this year.

Spot silver was flat at $22.64/oz, platinum fell 0.2% to $1,025.00 while palladium shed 0.1% to $2,359.73.

Reuters