Gold slips on firmer US Treasury yields and oil prices; traders await US Fed minutes

[SINGAPORE] Gold prices came under pressure on Tuesday (Aug 18) from higher US Treasury yields and a spike in oil prices, while traders awaited minutes of the US Federal Reserve’s July policy meeting for clues on the outlook for interest rates.

Spot gold was down 0.5 per cent at US$4,391.14 per ounce, as of 0423 GMT, while US gold futures for December delivery dropped 0.6 per cent to US$4,446.70. Yields on the benchmark 10-year US Treasury note extended gains, raising the opportunity cost of holding non-yielding bullion.

Oil prices also edged higher after Iran said it would shift to a “fully offensive” military posture following a breakdown in efforts to negotiate a permanent end to the war with the US, while Washington ruled out extending a temporary ceasefire agreement.

Oil prices will remain one of the key factors keeping gold under pressure as situation in the Middle East continues to look uncertain, ANZ analyst Soni Kumari said.

Traders’ expectations around US Fed policy rates are going to be important for gold, with a focus on technical levels, Kumari added.

Elevated energy prices tend to raise inflationary fears and bolster expectations of higher interest rates by the US Fed. While gold is typically seen as a hedge against inflation, higher interest rates tend to diminish bullion’s appeal.

However, market pricing for a September quarter-point hike flipped to a nearly 65 per cent chance of a “hold” after unexpected US job losses in July, lower-than-expected consumer price inflation and weaker retail sales.

Investors are also awaiting minutes from the US Fed’s most recent policy meeting, with the release scheduled for Wednesday.

Spot gold may test a support at US$4,381, a break below could open the way toward the US$4,320 to US$4,351 range, according to Reuters technical analyst Wang Tao.

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Among other metals, spot silver slipped 1 per cent to US$65.11 per ounce, platinum lost 1.2 per cent to US$1,748.56, while palladium fell 1.2 per cent to US$1,317.01. REUTERS