Gold inches lower on firm dollar, yields; US inflation data in focus

Gold inches lower on firm dollar, yields; US inflation data in focus

Gold prices edged lower on Wednesday, pressured by a stronger dollar and a rise in bond yields, while investors cautiously looked forward to US inflation data that could influence the Federal Reserve’s timeline to taper monetary support.

FUNDAMENTALS
Spot gold was down 0.2% at $1,725.98 per ounce by 0048 GMT, while US gold futures fell 0.2% to $1,728 per ounce.

The dollar index held firm near three-week high against its rivals, making gold more expensive for holders of other currencies.

US Treasury yields hit their highest levels since mid-July after the US Senate passed a massive infrastructure bill. Higher bond yields increase the opportunity cost of holding non-interest bearing gold.

The Democratic-controlled US Senate on Tuesday passed a massive infrastructure bill and immediately kicked off debate on a $3.5 trillion spending blueprint.

Wall Street rose, with both the blue-chip Dow and benchmark S&P 500 closing at record highs, as economically sensitive value stocks gained with the US Senate’s passage of a $1 trillion bipartisan infrastructure package.

Investors now await the monthly US personal consumption report due later in the day to gauge inflationary pressure.

The current inflation spike shouldn’t push the Fed to tighten monetary policy prematurely, with more months of labour data needed before any changes, Chicago Fed president Charles Evans said.

Indications in recent days of an improving labour market has raised fears of a sooner-than-expected US interest rate hike, sending gold prices to a four-month low on Monday.

Gold is viewed as a hedge against higher inflation, but a Fed rate hike would dull bullion’s appeal as that would increase the opportunity cost of holding the non-yielding metal.

Silver eased 0.1% to $23.29 per ounce. Platinum rose 0.7% to $1,001.92 and palladium was steady at $2,640.75.

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