Thursday, December 9

Gold dips on higher yields as focus turns to key c.bank meetings


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Gold prices eased further on Wednesday from the key level of $1,800 per ounce, after firmer US bond yields dented bullion’s appeal as investors assessed how central banks would address growing inflationary pressure.

Spot gold was down 0.2% at $1,789.02 per ounce, as of 0649 GMT, declining 1.3% since rallying to a more than one-month high last week. US gold futures dropped 0.2% to $1,790.80.

Benchmark 10-year US Treasury yields rose slightly, increasing the opportunity cost of holding the non-interest bearing metal.

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Shorter-term yields were also up with two-year yields spiking briefly above 0.5%, a level last seen in March 2020.

Market participants have now turned their attention to the Bank of Japan (BOJ) and the European Central Bank (ECB) meetings on Thursday and the pivotal US Federal Open Market Committee (FOMC) on Nov. 3.

“It is almost certain that the FOMC will announce the start of tapering and US yields and greenback should start to move higher. Gold will struggle to hold near $1,800 in this environment,” Jeffrey Halley, senior market analyst for Asia-Pacific at OANDA said .

“The capacity for a surprise from the Fed is high,” Halley said, citing the possibility of a more aggressive or accelerated pace of stimulus tapering, which could weigh on gold further.

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While the BOJ is set to maintain its massive stimulus program and slash this year’s inflation forecast, rising inflation fears in the euro zone could pose a challenge to the ECB.

Gold is often considered hike an inflation hedge, though reduced stimulus and interest rates tend to push government bond yields up, dimming bullion’s appeal.

On the technical front, spot gold looks neutral in a range of $1,783 to $1,795 per ounce, and an escape could suggest a direction, Reuters technical analyst Wang Tao said.

Spot silver fell 0.4% to $24.03 per ounce. Platinum eased 0.6% to $1,021.52 and palladium edged 0.1% up to $2,013.28. (Reporting by Nakul Iyer in Bengaluru; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)

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