Gold prices flat, concern over rising interest rates weighs

[NEW YORK] Gold prices were flat on Thursday, slumping early on concern about rising US bond yields and global interest rates, but buyers emerged to lift bullion when it hit a technical support level at about US$1,312 an ounce.

While a strengthening US dollar weighed on gold during the recent global stock market sell-off, more investors decided to buy bullion later, when prices touched the support level, said Michael Matousek, head trader at US Global Investors.

"Gold came into support at US$1,312 and bounced right from there," Mr Matousek said. "That support comes back from the late-December and early-January level and the level from October," Mr Matousek added.

Between late December and early January, gold prices rallied, reaching their highest in 1-1/2 years at US$1,366.07, largely on dollar weakness.

Spot gold was unchanged at US$1,318.12 per ounce by 1.53pm EST (1853 GMT), up off the session low of US$1,306.81, its lowest since Jan 2. US gold futures for April delivery settled up US$4.40, or 0.3 per cent, at US$1,319 per ounce.

In early trade, inflation-linked US bond yields crept up close to four-year highs after the Bank of England signaled more aggressive rate hikes. This fed concern that central banks around the world will raise interest rates.

"The increase in real bond yields has been pressuring gold, on top of the rebound we have seen in the dollar," said Julius Baer analyst Carsten Menke.

A stronger dollar makes dollar-denominated bullion more expensive for users of other currencies. Higher interest rates reduce the attraction of non-yielding gold.

Analysts polled by Reuters said they did not expect the dollar to rebound this year, despite expectations of at least three rate rises. The dollar later turned flat.

Adding to the pressure were comments by Federal Reserve officials that stock market turbulence was unlikely to derail US rate hikes this year and that the economy remains strong.

Meanwhile, silver increased 0.4 per cent at US$16.43 an ounce after touching US$16.22, the lowest since Dec 22.

Platinum declined 0.4 percent at US$976.30 per ounce, after touching a one-month low at US$965.

Palladium dropped 1.9 per cent at US$965.90 an ounce after reaching its lowest since Oct 31 at US$964.22.

Palladium fell below technical support at its 55-day moving average and broke an eight-month uptrend, Commerzbank analysts said. The metal, used in catalytic converters to control vehicle emissions, rose 56 per cent last year and to an all-time high in January.

REUTERS