NEW YORK: Gold erased earlier losses to hit a one-week high on Wednesday, as US Treasury yields eased after subdued inflation data.
Spot gold rose 0.5% to $1,723.01 per ounce by 1:59 p.m. EDT (1859 GMT), having bounced as much as $1,723.71, its highest since March 3.
US gold futures settled 0.3% up at $1,721.80.
“Gold is still taking cues from the Treasury market and today’s data lessens worries about near-term inflation,” said Edward Moya, senior market analyst at OANDA.
“If today’s 10-year note sale has decent demand, gold prices could eventually make a run towards $1,730. ... The $1,700 level will provide key support ... but that should hold unless the bond market sell-off resumes,” Moya said.
10-year US Treasury yields dropped after data showed US consumer prices increased in February, though underlying inflation remained tepid.
Gold’s status as an inflation hedge has been challenged by higher bond yields, which translate into a higher opportunity cost of holding non-yielding bullion.
Prices fell to their lowest in nine-months on Monday, at $1,676.10.
Real rates have risen sharply over the last few weeks due to higher nominal rates, without a commensurate rise in inflation expectations, TD Securities wrote in a note.
“With massive Treasury issuance on the horizon, the pressure on higher rates should continue to weigh on precious metals in the near-term.”
The US House of Representatives paved the way for a $1.9 trillion US COVID-19 relief bill to be considered on Wednesday.
The European Central Bank is also grappling with a recent rise in yields, but policymakers remain divided on large-scale market intervention ahead of a policy meeting on Thursday.
Silver rose 0.7% to $26.09 an ounce. Palladium gained 0.1% to $2,299.70, while platinum jumped 2.6% to $1,199.06.
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