Bengaluru — Gold prices eased on Monday from a one-month high scaled earlier in the session, as red-hot US inflation data lifted treasury yields and tempered the appeal of safe-haven bullion.
Spot gold was down 0.5% at $1,862.29/oz, at 2.05am GMT. US gold futures also eased 0.5% to $1,866.80.
Gold, which is seen as a safe-haven asset in times of economic crises, hit its highest since May 9 earlier in the session at $1,877.05/oz. However, benchmark US 10-year treasury yields also rose to their highest since May 9, weighing on demand for zero-yield gold.
“The fact that gold disconnected itself from moving inversely to the US dollar suggests to me that markets are belatedly moving into a much more vigorous risk aversion mode [due to the inflation data],” Oanda senior analyst Jeffrey Halley said.
US consumer prices accelerated in May, suggesting that the country’s central bank could continue with its 50-basis-points interest rate hikes until the end of September to combat inflation.
“The data delivered an unsympathetic wake-up call to financial markets that inflation remains both entrenched and has real upside risks. Gold is benefiting from a swing to defensive haven positioning as equities and [cryptocurrencies] get hammered,” Halley said.
Asian stocks sank on Monday on the worry of a further aggressive Federal Reserve policy tightening, while a Covid-19 warning from Beijing added to the concern about global growth.
It is a central bank-heavy week ahead, with the Fed expected to deliver its second consecutive half-point rate hike to bring inflation under control. Bullion is often seen as an inflation hedge, but the opportunity cost of holding it is higher when the Fed raises short-term interest rates, as gold yields no interest.
Spot silver dipped 1.1% to $21.63/oz, platinum fell 1.5% to $958.51, and palladium dropped 2.1% to $1,894.72.