Gold prices retreated on Thursday as elevated Treasury yields and a firm dollar dimmed its appeal in the run-up to the latest US inflation data, which could strengthen the Federal Reserve’s case for aggressive policy tightening.
Spot gold was down 0.3% to $1,847.80 per ounce by 1 p.m. ET, maintaining a similar level for over a week. US gold futures, too, fell 0.3% to $1,850.70 per ounce in New York.
[Click here for an interactive chart of gold prices]
Meanwhile, US Treasury yields rose, thus increasing the opportunity cost of holding non-yielding gold. The dollar also firmed, making gold less appealing for overseas buyers.
“Tomorrow’s inflation print has gathered substantial attention, but with the next few Fed hikes set in stone, the immediate relevance of data releases is limited,” TD Securities wrote in a note.
“Instead, market participants will be honed-in on any information that could inform the Fed’s decision-making process post-September.”
The core consumer price index (CPI) is expected to have risen 5.9% on the year, after an annual rise of 6.2% in April, according to a Reuters poll.
“The ECB signalled they’re going to start raising rates in July and continue to raise rates. It has gold trading a little lower … Feels like there’s some risk off in the markets that’s spilling over into gold too, plus the bond yields are up a little bit,” Bob Haberkorn, senior market strategist at RJO Futures, told Reuters.
The ECB said it will end bond buys on July 1 and raise rates by 25 basis points later in the month. It will hike again in September and may opt for a bigger move then, if the inflation outlook fails to improve.
(With files from Reuters)