Gold prices edged lower on Tuesday as U.S. Treasury yields ticked higher amid the prospect of more interest rate hikes, overshadowing support from a retreat in the dollar.
Spot gold eased 0.3% to $1,833.40 per ounce by 1215 GMT. U.S. gold futures 0.2% to $1,836.30.
The dollar, which has actually been the key driver for gold, is significantly softer, but the countervailing force is coming from a much higher U.S. Treasury yield, said Ross Norman, an independent analyst.
Higher interest rates and bond yields increase the opportunity cost of holding gold, which yields no interest.
The benchmark U.S. 10-year Treasury yield rose. On the other hand, the dollar weakened, making bullion more attractive for buyers holding other currencies.
After the Federal Reserve announced its biggest interest rate hike since 1994 earlier this month, other major central banks followed suit, leaning towards aggressive monetary policy tightening to tame soaring inflation.
European Central Bank Chief Christine Lagarde reaffirmed rate hike plans this week, with the Bank of England’s chief economist also echoing similar thoughts.
“There are conflicting factors at play that have prevented the metal from making a decisive move in one or the other direction,” Fawad Razaqzada, market analyst at City Index said.
Fed Chair Jerome Powell will testify in Washington D.C. later this week.
Meanwhile, European stock markets extended gains, aided by chemical, mining and oil stocks as dip buyers emerged after a bruising sell-off last week on recession fears.
Spot silver rose 0.2% to $21.63 per ounce, platinum gained 0.3% to $934.56, and palladium rose 0.75% to $1,860.57 per ounce.
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