Gold flat near 1-week low as US rate hike looms

[BENGALURU] Gold prices were flat on Wednesday (Jan 19), steadying near a 1-week low hit in the previous session, as the US Treasury yields strengthened to 2-year highs on expectations of quicker interest rate hikes by the Federal Reserve.

Spot gold was little changed at US$1,813.04 per ounce by 1.18 am GMT, after falling to a 1-week low of US$1,805 an ounce on Tuesday (Jan 18). US gold futures were steady at US$1,813.30.

Benchmark US Treasury yields jumped to 2-year highs on Tuesday, as traders prepared for the Fed to be more aggressive in tackling unabated inflation, ahead of its meeting on Jan 25-26.

Gold is considered an inflationary hedge, but the metal is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-interest bearing bullion.

The US dollar index posted its best daily gain in 4 weeks on Tuesday, rising to a 1-week high against a basket of currencies, making greenback-priced gold less attractive for overseas buyers.

Eurozone inflation is set to burn hotter throughout 2022 than expected a month ago, according to economists polled by Reuters, which could pressure the European Central Bank to tighten policy once the Omicron wave of the pandemic passes.

The Bank of Japan raised its inflation forecasts but said it was in no rush to change its ultra-loose monetary policy.

Oil prices climbed to their highest since 2014 as investors worried about global political tensions exacerbating the already tight supply outlook.

Spot silver was steady at US$23.44 an ounce, platinum was down 0.3 per cent to US$978.49, and palladium was little changed at US$1,896.83.

REUTERS