Economic news

Gold Set for Quarterly Loss on Strong Dollar, Bond Yields

* Bullion set for second quarterly drop in three

* Two more Fed officials support tapering this year

* Dollar holds near 1-year peak

Sept 30 (Reuters) - Gold prices were set on Thursday for a second quarterly drop in three quarters as the prospect of the U.S. Federal Reserve tapering its pandemic-era stimulus strengthened the greenback, making bullion more expensive for holders of other currencies.

Spot gold edged up 0.2% to $1,729.56 per ounce by 0625 GMT, partially recovering from the Aug. 9 low of $1,720.49 touched in the previous session. U.S. gold futures were up 0.4% to $1,729.20.

“Gold is lacking direction in the short-term as money whipsaws between different asset classes with the dollar being the ultimate hedge against most risk as opposed to gold,” Michael Langford, director at corporate advisory AirGuide said.

Expectations that the Fed could withdraw economic support kept the dollar index near a one-year high. Spiking U.S. bond yields added to the currency’s firmness.

Deepening safe-haven bullion’s woes, benchmark U.S. 10-year Treasury yields held above 1.5%, a level not seen since late-June.

Two Federal Reserve officials said on Wednesday they were in favour of the central bank beginning to wind down its asset purchases this year.

Reduced central bank stimulus and interest rate hikes tend to push government bond yields higher, raising the opportunity cost of holding non-yielding gold.

“While there are ample risks that could help gold break higher, like weaker economic data or the Evergrande debt crisis potentially spilling over into other economies, these are unlikely to provide lasting support,” DailyFX currency strategist Ilya Spivak said.

“We’re also seeing gold and stocks fall together recently, underscoring that gold is not acting as a haven against losses in riskier assets because what’s really driving both these assets down are rising bond yields and not a risk-off move.”

Silver rose 0.2% to $21.56 per ounce.

Platinum gained 0.5% to $955.61 while palladium climbed 1% to $1,875.42.

(Reporting by Nakul Iyer in Bengaluru; Editing by Ramakrishnan M. and Sherry Jacob-Phillips)

Source: Reuters

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