Gold erases losses as government bond yields retreat

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Gold reversed and rose Wednesday as a decline in US Treasury yields helped offset pressures from a firmer dollar and the Federal Reserve’s plans for aggressive rate hikes.

Spot gold rose 0.1% to $1,816.49 an ounce at 2:10 PM ET (1810 GMT). US gold futures fell 0.2% at $1,815.9.

Treasury yields fell amid choppy trading, tracking losses on Wall Street, after poor US housing market data added to growing concerns about an economic slowdown.

“Another round of weakness in the stock markets combined with falling yields and safe-haven bids are pushing gold prices higher,” said David Meger, director of metals trading at High Ridge Futures.

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Fed Chair Jerome Powell promised Tuesday that the US central bank would raise interest rates as high as necessary to halt a rise in inflation.

“The real question and the crux of the matter is whether what the Fed is doing is sufficient given the amount of inflation. If it’s not enough to quell inflationary pressures, gold will be supportive in that environment,” Meger said.

While gold is considered a hedge against inflation, rising interest rates dampen interest in non-performing precious metals.

Limiting gold’s advances, the rival safe-haven dollar rebounded after its biggest one-day drop in more than two months.

Rupert Rowling, market analyst at Kinesis Money, said in a note that while gold improved slightly this week and bounced back above $1,800, “as long as inflation remains a primary concern for major economies, gold will likely find it difficult to make significant gains with it.” specter of rising interest rates seriously denting the metal’s appeal.

As a result of general sentiment, inflows into the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, continued to decline. Spot silver fell 0.9% to $21.42 an ounce, platinum fell 1.6% to $935.49 and palladium fell 3.1% to $1,990.06.

(Reporting by Ashitha Shivaprasad and Swati Verma in Bengaluru; editing by Shinjini Ganguli and Devika Syamnath)

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Amanda Peterson: Amanda is an economist turned blogger who provides readers with an in-depth look at macroeconomic trends and their impact on businesses.

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