Gold heads for fourth monthly fall on strong dollar, yields

Bengaluru — Gold prices were set on Friday for a fourth consecutive monthly drop, pressured by strong performances in the greenback and US bond yields and aggressive monetary policies from top central banks.

Spot gold inched up 0.2% to $1,758.94/oz, at 3.37am GMT. US gold futures rose 0.3% to $1,775.10.

Gold remains inversely correlated to the dollar and yields, rather than being a gold story in itself, Oanda senior analyst Jeffrey Halley said, adding that their recent dips provided some support to bullion this week.

The metal is set for its best week since mid-May, with prices up 1.9% so far. However, bullion is unlikely to stave off its worst run of monthly losses since November 2020. The dollar has spent most of July hovering around 20-year highs, hammering demand for greenback-priced gold among other currency holders.

The US Federal Reserve on Wednesday hiked interest rates by three-quarters of a percentage point as it attempts to fight soaring inflation. Benchmark US 10-year Treasury yields firmed after hitting a three-month low on Thursday. Higher rates and bond yields increase the opportunity cost of holding non-interest bearing gold.

“Although bullion saw a sell-off below $1,700 [earlier this month] it is significant that long-term support at $1,675/80 was tested and held. Gold has been trying to form a bottom since,” helped by recent signs of a US recession, Halley said.

The US economy unexpectedly contracted in the second quarter, raising risks of an economic slowdown, which lifted gold’s safe-haven allure and helped bullion prices gain more than 1% on Thursday.

Spot silver firmed 0.3% to $20.04/oz, while platinum eased 0.2% to $886.24. Both face monthly losses. Palladium rose 0.8% to $2,095.13/oz, and has gained about 8.2% this month, its best since January.