Gold flat on firmer dollar, US bond yields

[BENGALURU] Gold prices were flat on Tuesday (Dec 7), as a firmer dollar and US Treasury yields weighed on its appeal and confined the metal to a tight US$4 range.

Spot gold was little changed at US$1,778.79 per ounce by 1.30 am GMT. US gold futures were flat at US$1,780.

The dollar index steadied, hanging on to an overnight jump made with US yields as investors hoped early signs the Omicron variant may be mild will be proved correct.

A stronger dollar raises gold's costs to buyers holding other currencies, while higher yields increase bullion's opportunity cost.

Bank of England Deputy Governor Ben Broadbent said on Monday (Dec 6) that inflation in Britain might "comfortably exceed" 5 per cent in April and that the country's tight labour market risked becoming a more persistent source of inflation.

Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of non-interest bearing gold.

Financial markets, which have struggled this year to decipher central bankers' policy signals, face their biggest challenge yet in December when in the space of 24 hours the Federal Reserve, Eurpean Central Bank and Bank of England hold crucial meetings.

Euro zone finance ministers remained upbeat on Monday about economic growth prospects despite the Omicron coronavirus variant, and they agreed to continue moderately supportive fiscal policy next year.

The Perth Mint's sales of gold products in November jumped about 94 per cent from the previous month to an 8-month peak, the refiner said on Monday.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell about 0.2 per cent to 982.64 tonnes on Monday from 984.38 tonnes on Friday (Dec 3).

Spot silver fell 0.2 per cent to US$22.31 an ounce. Platinum was steady at US$938 and palladium dropped 0.3 per cent to US$1,849.19.

REUTERS