Gold subdued as US yields firm, dovish Fed hopes lend support

GOLD prices edged lower in early Asian hours on Monday after hitting a two-week high in the last session, weighed by a slight uptick in US Treasury yields, although expectations that US rates have peaked underpinned bullion.

Spot gold was down 0.2 per cent at US$1,975.80 per ounce as of 0043 GMT, after rising 2.2 per cent last week. US gold futures slipped 0.3 per cent to US$1,978.50.

Benchmark US 10-year Treasury yields edged up to 4.4647 per cent after dropping to a two-month low, decreasing the appeal of non-interest bearing gold.

Data pointing to a slowing jobs market in the United States and a weaker-than-expected consumer inflation report last week prompted market participants to revise their forecasts for future Federal Reserve action.

Traders now widely expect the Fed to leave rates unchanged at its Dec 12-13 policy meeting, according to the CME FedWatch tool.

Lower interest rates exert downward pressure on the dollar and bond yields, enhancing the appeal of non-yielding bullion.

Meanwhile, the dollar languished near more than a two-month low against its rivals, making gold less expensive for other currency holders.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 1.49 per cent to 883.43 tonnes on Friday from 870.45 tonnes on Thursday.

Investors now look forward to minutes from the US central bank’s last meeting for more clarity on the interest rate path.

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Asian shares got off to a slow start on Monday in what will be a holiday-shortened week and with market valuations looking a little stretched given they have already priced in aggressive global policy easing for next year.

In the Middle East, US and Israeli officials said a deal to free some of the hostages held in the besieged enclave was edging closer despite fierce fighting in Gaza.

Spot silver rose 0.6 per cent to US$23.83 per ounce, while platinum was flat at US$892.58. Palladium eased 0.2 per cent to US$1,035.77 per ounce. REUTERS