LONDON: Gold prices edged higher on Thursday, supported by softer US Treasury yields, ahead of the European Central Bank's meeting where investors will watch for its remarks on inflation and policy outlook. Spot gold rose 0.2% to $1,799.30 per ounce by 1054 GMT. US gold futures inched 0.1% higher to $1,800.40.
Benchmark 10-year US Treasury yields traded close to a two-week trough, helping gold gain. "Gold's 10-day moving average is giving solid support. Flattening yield curves combined with their higher absolute levels, suggest the markets are increasingly thinking of stagflation," StoneX analyst Rhona O'Connell said.
Gold is traditionally seen as an inflation hedge. However, reduced stimulus and interest rate hikes would push government bond yields up, translating into a higher opportunity cost for holding gold that pays no interest. The ECB is expected to keep policy unchanged and push back against growing expectations for an interest rate hike next year.
Analysts say the US Federal Reserve's meeting on Nov. 2-3 would be more crucial for gold after chief Jerome Powell's recent comments on tapering asset purchases. "Tapering should already be well and truly discounted, although there is bound to be a short-lived knee-jerk reaction to the Fed's statement next Wednesday - there always is!" StoneX' O'Connell added.
Focus also remains on the US Commerce Department's advance gross domestic product report for the third quarter later today. Meanwhile, demand for gold fell in the third quarter to its lowest since the last quarter of 2020, the World Gold Council (WGC) said.
WGC, however, expects physical demand in large consumer India to strengthen in the fourth quarter. "We're seeing some more buyers being drawn into the gold market and that's partly around the narrative of higher prices," said Nicholas Frappell, global general manager at ABC Bullion. Spot silver rose 0.1% to $24.07 per ounce, platinum gained 0.8% to $1,018.44, while palladium climbed 1.8% to $1,998.64.