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Home/Gold rises as dollar counters higher U.S. bond yields

Gold rises as dollar counters higher U.S. bond yields

U.S. benchmark 10-year Treasury yields were near their highest since May 20

Prices of gold rose on Wednesday, as a subdued dollar outweighed pressure from elevated U.S. bond yields and lingering fears over earlier-than-expected interest rates hikes.

Spot gold increased 0.4% to $1,775.21 per ounce by 0733 GMT. The metal rose 1.2% on Tuesday before giving up most of those gains as Treasury yields rallied. U.S. gold futures added 0.3% to $1,776.20.

On Wednesday, U.S. benchmark 10-year Treasury yields were near their highest since May 20, raising the opportunity cost of holding non-yielding bullion.

But offsetting higher yields, the dollar index was little changed and not far from the Tuesday’s close which was its lowest level in nearly a week. A weaker dollar makes bullion cheaper for buyers holding other currencies.

Gold continues to hang in there, but the writing is on the wall and as soon as the Fed makes a more hawkish pivot, gold could ignore higher inflation and trend lower, said Stephen Innes, managing partner at SPI Asset Management.

If inflation keeps rising at its current pace in the next few months, Fed policymakers may need to adopt a more aggressive policy response next year, Fed Governor Christopher Waller said on Tuesday.

Though persistent inflation would be a greater risk for the U.S. economy over the coming year, a majority of economists in a Reuters poll expect the Federal Reserve to wait until 2023 before raising interest rates.

Gold is often considered an inflation hedge, though reduced stimulus and interest rate hikes push government bond yields up.

ANZ analysts said in a note that although strong risk appetite weighed on bullion demand, retail investment remained strong and physical offtake was robust during the festival season, supporting gold.