PRECIOUS gold rises but strong dollar, bond yields weigh in
B.and Nakul Iyer
September 30 (Reuters) – Gold prices rose slightly on Thursday after hitting a seven-week low in the previous session, despite a resilient dollar and increased US Treasury bond yields keeping the pressure intact.
Spot gold XAU = rose 0.4% to $ 1,733.55 an ounce by 0334 GMT, rebounding slightly from its lowest since Aug. 9 at $ 1,720.49, hit on Wednesday. US gold futures GCv1 rose 0.7% to $ 1,734.10 an ounce.
Gold was weighed down by expectations that the US Federal Reserve could begin reducing its pandemic incentives that were holding the dollar index = USD close to an annual high.
A stronger dollar makes gold more expensive for buyers who own other currencies.
“Gold is consolidating before there is perhaps another big decline,” said DailyFX currency strategist Ilya Spivak, pointing to the move by the Fed towards a tightening and a steeper rate hike cycle than the markets had originally expected.
“While there are numerous risks that could help gold break higher, such as weaker economic data or the Evergrande debt crisis that may spill over into other economies, these are unlikely to provide any lasting support.”
A break below $ 1,700 could cause gold to test the $ 1,675-1,680 level, Spivak said.
Two Federal Reserve officials said Wednesday they were in favor of the central bank starting its monthly bond purchases this year.
The benchmark yields on 10-year US Treasuries are contributing to the problems of the gold bars US10YT = RR rose slightly and stayed above 1.5%, a level not seen since the end of June.USD /US/
Gold has traditionally been viewed as an inflation hedge, but reduced central bank incentives and interest rate hikes tend to drive government bond yields higher, which in turn leads to higher opportunity costs for gold that pays no interest.
silver XAG = rose 0.2% to $ 21.56 an ounce. platinum XPT = gained 0.6% on $ 956.23 and palladium XPD = rose 0.7% to $ 1,870.18.
(Reporting by Nakul Iyer in Bengaluru; editing by Ramakrishnan M.)
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.