Gold subdued as firmer U.S. dollar, yields dent appeal

Gold edged lower on Tuesday as an uptick in the U.S. dollar and bond yields weighed on bullion’s appeal, with investors awaiting more cues on the Federal Reserve’s rate-hike path.

FUNDAMENTALS

* Spot gold was down 0.2% to $1,706.25 per ounce by 0103 GMT. U.S. gold futures fell 0.3% to $1,705.30.

* The dollar was up 0.1% against its rivals, making greenback-priced bullion more expensive for buyers holding other currencies.

* U.S. Treasury yields rose as upbeat economic data released last week and a quiet period from the Federal Reserve set the stage for risk taking.

* Expectations for a 100-basis-point rate hike by the Fed at its policy meeting next week stood at about 31%, according to CME’s FedWatch Tool https://bit.ly/3vlvxSL after reaching as high as 80% last week.

* On Friday, Fed officials signalled they would likely stick with a 75-basis-point interest rate increase at their upcoming policy meeting, though a recent high inflation reading could still warrant larger increases than anticipated later in the year.

* Although gold is seen as an inflation hedge, higher interest rates and bond yields raise the opportunity cost of holding bullion, which yields no interest.

* Data showed U.S. home builder sentiment plummeted in July to its lowest level since the early months of the coronavirus pandemic, as high inflation and the steepest borrowing costs in more than a decade brought customer traffic to a near standstill.

* SPDR Gold Trust , the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.5% to 1,009.06 tonnes on Monday from 1,014.28 tonnes on Friday.

* Spot silver eased 0.1% to $18.66 per ounce, platinum slipped 0.2% to $860.88, and palladium climbed 0.6% to $1,865.83.

DATA/EVENTS (GMT)


0600 UK Claimant Count Unem Chng June

0600 UK ILO Unemployment Rate May

0900 EU HICP Final MM, YY June

1230 US Housing Starts Number June

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