Gold stuck in a range as yields rise, rate hike bets increase

Gold prices were hemmed into a range on Tuesday as rising U.S. Treasury yields and aggressive rate hike bets dimmed bullion’s appeal despite a pullback in the dollar.

Spot gold fell 0.2% to $1,834.19 per ounce by 1:56 p.m. ET (1756 GMT). U.S. gold futures settled down 0.1% at $1,838.8.

“Treasury yields are slightly higher and there is a small bounce back in U.S. equities, both putting some pressure on gold. However, the dollar is down and is offering some support,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

Denting bullion’s appeal, benchmark U.S. Treasury 10-year rose.

The dollar index fell 0.3%, making greenback-priced bullion more attractive for overseas buyers.

Earlier this month, the U.S. Federal Reserve announced its biggest interest rate hike since 1994. Following suit, other major central banks are also leaning towards aggressive monetary policy tightening to tame soaring inflation.

The Fed’s Thomas Barkin said an interest rate increase of 50 or 75 basis points at the U.S. central bank’s next policy meeting in July is a good base case.

“Gold is now caught between expectations of sharper rate hikes, but also inflation remaining elevated if monetary policy fails to soften economic activity and bring inflation lower,” Standard Chartered analysts said in a note.

Inflation and economic uncertainties usually spur safe-haven buying of gold, but rising interest rates increase the opportunity cost of the non-yielding bullion.

Fed Chair Jerome Powell will testify in Washington D.C. later this week.

“The Fed in the last meeting was at its maximum hawkishness” and that should decelerate going forward, Blue Line’s Streible said.

Spot silver rose 0.6% to $21.70 per ounce, platinum also rose 0.6% to $936.99, while palladium was up 1.4% at $1,873.15.