Gold slips as higher US Treasury yields offset focus on Fed chair Warsh’s inflation message
The US central bank has voted nine to three in favour of holding rates
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GOLD prices slipped on Thursday (Jul 30), pressured by higher US Treasury yields, while markets assessed comments from US Federal Reserve chairman Kevin Warsh on tackling inflation after the central bank left its interest rates unchanged on Wednesday.
Spot gold was down 0.4 per cent at US$4,048.39 per ounce, as at 0445 GMT, after rising as much as 2 per cent on Wednesday. US gold futures for August delivery gained 0.3 per cent to US$4,045.70.
Yields on the benchmark 10-year US Treasury note climbed, increasing the opportunity cost of holding bullion.
“Yields are a by-product of the rate expectations, and if market expects that inflation fears will translate into higher rates, yields will be higher,” and this is pressuring gold, ANZ analyst Soni Kumari said.
A divided US Federal Reserve left interest rates unchanged on Wednesday while Warsh reaffirmed the central bank’s commitment to bringing inflation under control, leaving markets uncertain about its next policy move.
While gold is seen as an inflation hedge, it loses its appeal as a non-yielding asset in a high-interest-rate environment.
Markets are still pricing in a 65 per cent chance of a rate hike in September, although this is down from about 81 per cent before the policy decision, according to CME Group’s FedWatch tool.
Investors are also awaiting June’s US Personal Consumption Expenditure data, due at 1230 GMT.
On the geopolitical front, the US carried out fresh strikes in Iran on Wednesday, the US military said, further intensifying a five-month-old war that was already expanding beyond its main fronts to embroil additional countries in the region.
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Oil prices gave up some of their gains on Thursday as oil tankers continued to make their way out of the Middle East.
“The yellow metal is likely to drift back toward US$3,900 per ounce as oil remains under pressure to move even higher through the summer,” analysts at TD Securities said in a note.
Spot silver fell 0.6 per cent to US$57.30 per ounce and platinum fell 1.1 per cent to US$1,593.77. Palladium rose 0.6 per cent to US$1,253.25. REUTERS
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