Gold retreats as dollar, bond yields resume climb

(Reuters) – Gold prices slipped on Wednesday as the dollar rose and bond yields strengthened after data showed U.S. private payrolls increased more than expected in July.

Spot gold was down 0.4% at $1,935.77 per ounce at 2:45 p.m. EDT (1845 GMT), after rising as much as 0.6% earlier on some safe-haven bids after ratings agency Fitch downgraded the U.S. government’s credit rating to AA+ from AAA.

U.S. gold futures settled 0.2% lower at $1,975.

“Higher interest rates would ultimately put pressure on gold. Also, we are seeing more strength in the dollar. Prices are trapped below $2,000 and above $1,900 for the time being,” said Daniel Pavilonis, senior market strategist at RJO Futures.

The dollar rose 0.3% to more than a three-week high, making gold more expensive for holders of other currencies. Benchmark U.S. 10-year Treasury yields climbed to their highest level since November 2022. [USD/] [US/]

U.S. private payrolls rose by 324,000 jobs last month, the ADP National Employment Report showed, well above the increase of 189,000 that economists polled by Reuters had forecast.

The Federal Reserve raised interest rates by 25 basis points last week. According to the CME’s FedWatch Tool, the probability that the U.S. central bank would leave rates unchanged at its Sept. 19-20 meeting was at 83%.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

“Traders and investors are not badly shaken over the surprise Fitch news, but it did somewhat deflate heretofore upbeat marketplace attitudes that had recently pushed U.S. stock indexes to new highs for the year,” Jim Wyckoff, senior market analyst at Kitco, wrote in a note. [.N]

All eyes are on the release on Friday of the U.S. nonfarm payrolls report for July. Overall payrolls are forecast to rise by 200,000, after increasing by 209,000 in June.

Elsewhere, spot silver fell 2.5% to $23.72 per ounce, platinum dropped 1.1% to $921.10 and palladium gained 0.1% to $1,240.74.