Gold subdued on firm yields with US inflation in focus

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Gold inched lower on Thursday pressured by elevated US Treasury yields as the focus turned to US inflation data for the Federal Reserve’s interest rate hike plan after the European Central Bank signalled a July increase.

The ECB said it will end bond buys on July 1 then raise rates by 25 basis points later that month. It will hike again in September and may opt for a bigger move then if the inflation outlook fails to improve.

Also read | Dollar gains as US stocks fall, ECB decision on tap

Spot gold fell 0.3 per cent to 1,847.59 dollars per ounce by 1249 GMT, little changed after the ECB decision.

US gold futures shed 0.3 per cent to 1,850.00 dollars.

“It seems to be that the ECB are willing to raise rates, but not go particularly aggressive and that’s the sentiment the (gold) market’s taking away”, said Nitesh Shah, analyst at WisdomTree.

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“Inflation upside surprises are always a catalyst for gold price moves. But on the flip side, you got the Fed reacting to these numbers, the market right now is expecting back to back 50 bps rate increases that will act as a headwind”, Shah added.

The monthly US consumer price index data on Friday could signal whether the Fed will continue its aggressive policy tightening post July.

The benchmark US 10-year Treasury yields held steady near the key 3 per cent threshold, eroding gold’s appeal. 

Rising interest rates increase the opportunity cost of holding non-yielding bullion, even though the metal is considered a safe haven amid political and economic uncertainties.

Also read | ‘Shrinkflation’ is on the rise: Companies reducing package size, without lowering price

“We’ll probably have to wait until tomorrow’s CPI report before we see a sustainable move in either direction, but we’ve taken comfort that ETF (exchange-traded fund) flows into gold yesterday were their strongest in a month”, City Index senior market analyst Matt Simpson said.

Spot silver dipped 0.5 per cent to 21.92 dollars per ounce, while platinum shed 2.1 per cent, to 984.71 dollars. Palladium fell 0.8 per cent to 1,927.59 dollars.

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