Gold flat near 1-week low after hawkish Fed, higher yields

[BENGALURU] Gold was flat on Thursday (Jan 27), holding near a 1-week low hit in the previous session, after the Federal Reserve decided on March rate hikes that pushed up US Treasury yields and the dollar, while uncertainty over Ukraine capped bullion's losses.

Spot gold was unchanged at US$1,817.29 per ounce by 1.17 am GMT, hovering near a 1-week low of US$1,814.51. US gold futures fell 0.7 per cent to US$1,817.20.

The Federal Reserve on Wednesday said it is likely to hike interest rates in March and reaffirmed plans to end its bond purchases that month in what US central bank chief Jerome Powell pledged will be a sustained battle to tame inflation.

US Treasury 2-year yields climbed to a 23-month high at the start of Asian trading on Thursday, while 10-year yields hovered near 1-week highs touched in the last session.

Higher yields raise the opportunity cost of holding non-interest paying gold.

The dollar index, as measured against 6 major trading currencies, rose to a high last seen on Nov 22.

Gold is generally seen as an inflationary hedge, but it is highly sensitive to rising US interest rates, which increases the opportunity cost of holding non-interest bearing bullion.

The United States said on Wednesday it had set out a diplomatic path to address sweeping Russian demands in eastern Europe, as Moscow held security talks with Western countries and intensified its military build-up near Ukraine with new drills.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose about 0.1 per cent to 1,014.26 tonnes on Wednesday.

Spot silver shed 0.4 per cent to US$23.40 an ounce. Platinum fell 0.5 per cent to US$1,026.50 and palladium remained unchanged at US$2,327.55.

REUTERS