Gold slips in face of rebounding US bond yields

Bengaluru — Gold prices eased on Thursday as a rebound in US treasury yields tempered bullion’s safe-haven demand stemming from the Ukraine crisis and its potential effect on the global economy.

Spot gold was down 0.3% at $1,951.76/oz, at 3am GMT. US gold futures were down 0.1% at $1,954.50.

Benchmark US 10-year treasury yields inched up after they fell from three-year highs on Wednesday. US bond yields have marched higher on the expectation that the Federal Reserve will aggressively hike interest rates as inflation accelerates at its fastest pace in 40 years. Gold is highly sensitive to rising short-term US interest rates and higher yields, which increase the opportunity cost of holding zero-yield bullion.

“As the critical level of $2,000 wasn't broken, people have probably decided to take profits ... and move funds out to equities or even short-term treasury bills,” said Brian Lan, MD at dealer GoldSilver Central. Lan said gold would look to consolidate in the near term and is currently doing so at about $1,940/oz-$1,960/oz.

Earlier this week, gold came within striking distance of the key $2,000 level as concern around the Russia-Ukraine conflict and rising inflationary pressures increased safe-haven bids.

“Geopolitical risk and inflation pressure are currently the two primary drivers for the gold market. An aggressive Fed rate hike of 75 basis points could be a short-term price damper, while elevated inflation due to supply shocks could mitigate the negative impact,” ANZ research said in a note.

The dollar also strengthened after dropping in the previous session, making greenback-priced gold less attractive for other currency holders.

Spot silver dipped 0.4% to $25.07/oz, platinum was flat at $986.86, and palladium slipped 0.2% to 2,446.17.

Reuters