Gold edges lower pulled by firm US bond yields

Bengaluru — Gold prices edged lower on Tuesday, weighed down by firmer US treasury yields and bets the Federal Reserve could tighten policy more aggressively ahead of inflation data later this week.

Spot gold fell 0.1% to $1,777.05 an ounce by 5.13am GMT. US gold futures were down 0.1% at $1,778.50.

Benchmark US 10-year Treasury yields extended its overnight gains, rising to 1.45% on Tuesday. Higher yields increase gold’s opportunity cost.

Fed policymakers are likely to accelerate the tapering of stimulus measures at a policy meeting next week with data showing unemployment plunged last month, suggesting the labour market was tightening. Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of non-interest bearing gold.

Friday’s US consumer price index (CPI) report could also be crucial in gauging the Fed’s next move.

“Gold should slowly tread lower on the prospect of tighter policy and if CPI comes out hotter than expected, that’s only going to lead to a more aggressive Fed being priced in,” said IG Markets analyst Kyle Rodda.

“Real yields are still negative and so investors could look to diversify from bonds into some other store of value, which could support gold,” Rodda said, cautioning that this would ultimately depend on how hawkish the Fed is next week and how the Omicron variant affects inflation expectations.

Investors also took stock of November sales of gold products nearly doubling from the previous month at Perth Mint, one of the world’s biggest gold producers.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell about 0.2% to 982.64 tonnes on Monday.

Spot silver fell 0.3% to $22.29 an ounce. Platinum dropped 0.1% to $937.00 and palladium fell 0.8% to $1,839.39. 

Reuters