Gold firms as US dollar, bond yields fall

GOLD prices rose on Thursday (Oct 27), as the US dollar and Treasury yields fell on mounting expectations of slower monetary policy tightening by the Federal Reserve later in the year.

Spot gold rose 0.3 per cent to US$1,669.16 per ounce by 0116 GMT, after hitting a two-week high on Wednesday.

US gold futures were up 0.3 per cent at US$1,673.30.

The dollar index was little changed after hitting its lowest level since Sep 20 earlier. A weaker dollar makes greenback-priced gold less expensive for overseas buyers.

Benchmark US 10-year Treasury yields slid further away from multi-year peak touched last week.

Report from Commerce Department on Wednesday showed sales of new US single-family homes dropped in September and data for the prior month was revised lower, supporting the view that Fed rate increases are already working.

The US central bank is widely expected to announce a fourth straight 75 basis-point interest rate increase at the end of their Nov 1-2 policy meet.

Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

The European Central Bank will raise interest rates again on Thursday and likely reel in a key subsidy to commercial banks, taking another huge step in tightening policy to fight surging inflation.

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Gold subdued as dollar ticks higher; investors eye Fed outlook

International Monetary Fund chief Kristalina Georgieva said on Wednesday that central banks should keep raising interest rates further to fight inflation until they hit a “neutral” level, though in most cases they have not reached this point.

Spot silver was little changed at US$19.61 per ounce, platinum rose 0.1 per cent to US$952.62 and palladium gained 0.8 per cent to US$1,979.30. REUTERS