Rebounding dollar takes the shine off gold

Bengaluru — Gold prices retreated from a four-and-a-half-month high on Thursday, hurt by an uptick in the US dollar and bond yields, while investors awaited key economic readings out of the US this week.

Spot gold was down 0.1% at $1,894.88/oz by 2.35am GMT, after hitting its highest level since January 8 at $1,912.50 on Wednesday.

US gold futures declined 0.3% to $1,898/oz.

“Gold prices reversed back in parallel with the rebounding US dollar. What this suggests is that we are starting to see markets positioning ahead of Friday’s PCE [personal consumption expenditure] report,” DailyFX currency strategist Ilya Spivak said.

The dollar index rose to a one-week high against rivals, making gold more expensive for other currency holders.

Benchmark US treasury yields rose to 1.58%, increasing the opportunity cost of holding non-interest bearing gold.

Market participants now await the monthly US PCE report due on Friday to gauge inflationary pressure. US GDP and jobless claims data is due later on Thursday.

Federal Reserve officials have recently downplayed rising price pressures and affirmed their support to keep monetary policy accommodative for some time.

“There are concerns that inflation will not be temporary and the Fed will be forced to begin to taper stimulus much sooner than they currently expect,” Spivak said.

On Wednesday, Fed vice-chair for supervision Randal Quarles said he was prepared to open talks on reducing the central bank’s emergency support measures, only to also stress the need to remain patient.

Meanwhile, South Korea’s central bank kept monetary policy unchanged on Thursday but upgraded its economic outlook as exports and inflation perked up.

Elsewhere, palladium fell 0.4% to $2,734.57/oz, silver slipped 0.5% to $27.56 and platinum dipped 0.4% to $1,185.99. 

Reuters