Steady dollar and firmer bond yields keep the lid on gold prices

Bengaluru — Gold prices were flat on Thursday, as a steady US dollar and elevated treasury yields weighed on greenback-priced bullion, with the metal’s outlook already dampened by an aggressive Federal Reserve stance on inflation.

Spot gold held its ground at $1,816.39/oz at 2.42am GMT. US gold futures edged 0.1% lower to $1,813.50.

Gold’s daily closing price is effectively hugging the trend line projected from the March 2020 (pandemic) low, and intraday volatile spikes either side of that key trend line have lacked conviction to prompt a sustainable move, City Index’s senior market analyst Matt Simpson said.

Bullion has largely seemed to track daily moves in the dollar and benchmark US 10-year treasury yields in recent weeks, with 20-year highs in the greenback pushing gold prices to their lowest level in well over three months on Monday. A stronger dollar makes gold less attractive for buyers holding other currencies.

Gold’s performance and outlook have also been under the cloud of an aggressive Fed monetary policy stance on rate hikes as the bank pushes to rein in soaring inflation. Higher US short-term interest rates and bond yields raise the opportunity cost of holding bullion, which yields nothing.

Fed chair Jerome Powell on Tuesday pledged that the US central bank would ratchet interest rates as high as needed to kill a surge in inflation that he said threatened the foundation of the economy.

“ETF [exchange traded fund] flows peaked on the 27th of April and we’ve since seen a net outflow as investors have lost confidence in the yellow metal ... And the rout in stock markets simply added another reason for some investors to convert their gold to cash,” Simpson said.

Spot silver edged up 0.1% to $21.41/oz, while platinum dropped 0.9% to $927.37, and palladium slipped 0.6% to $2,004.58.

Reuters