Gold prices dipped slightly yesterday on elevated US Treasury yields, but there was some support from concerns over persistently higher inflation.
Spot gold fell 0,2 percent to US$1 777.70 per ounce by 1202 GMT, largely trading in a narrow range. US gold futures fell 0,3 percent to US$1 780.40.
“Rising yields have been obviously negative for gold, and yet at the same time you have inflationary pressures rising with crude oil (prices) surging, which in turn have raised demand for gold,” said Fawad Razaqzada, analyst with ThinkMarkets.
Gold remained trapped between US$1 800 resistance and support around US$1 750 due to the conflicting factors.
US benchmark 10-year yields hit their highest in five months.
While gold is often considered an inflation hedge, reduced stimulus and interest rate hikes push government bond yields up, raising the opportunity cost of holding non-yielding bullion.
Two US Federal Reserve officials said on Wednesday that while the central bank should begin winding down its stimulus measures, it was too soon for interest rate hikes.
UBS analysts said in a note that rising inflation expectations and softening growth expectations could support gold prices in the next month or two, though it is not indicative of a “regime change” towards stagflation.
The bank forecasts gold prices at US$1 700/oz at end-March 2022 and US$1 600/oz by end-December 2022.
Capping gold’s decline, the dollar index was flat, having hit a three-week trough earlier in the session.
“The near-term trend is still very much against the dollar which is supportive for gold prices. A move below 93-93.50 support in the dollar index should force gold above US$1 800,” OANDA analyst Craig Erlam said.Spot silver fell 0,9 percent to US$24,06 per ounce. Platinum dropped 1,5 percent to US$1 035 and palladium slipped 2,2 percent to US$2 027. — Reuters.