The yellow metal is bearish towards the start of the London session on Thursday, with rebounding U.S. Treasury yields countering safe-haven demand from the ongoing war in Ukraine and its potential impact on the global economy.
Gold futures edged down 0.13%, currently trading at $1,953 an ounce. The dollar, which normally moves inversely to gold, inched up on Thursday, currently trading over 100 basis points.
Also, to add, the benchmark U.S. 10-year Treasury yields were back on an upward trend after falling from three-year highs on Wednesday. U.S. bond yields have been climbing over expectations that the U.S. Federal Reserve will aggressively hike interest rates.
What you should know
- The yellow metal came close to the $2,000 mark earlier in the week, with concerns around the war in Ukraine precipitated by the Russian invasion of Feb. 24 and rising inflationary pressures giving the safe-haven asset a boost.
- However, a decline came in as a result of a strong dollar which came as a result of high prospects of interest rate increment from the U.S. Fed.
- New York Fed President, John Williams said that a half-point rate rise next month was “a very reasonable option,” in a further sign that even more cautious policymakers are on board with faster monetary tightening.
- Investors now await comments from Fed Chairman Jerome Powell and European Central Bank President Christine Lagarde, who will speak at an International Monetary Fund event later in the day. Bank of England Governor Andrew Bailey will speak a day later.
- GoldSilver Central managing director Brian Lan told Reuters that “As the critical level of $2,000 wasn’t broken, people have probably decided to take profits… and move funds out to equities or even short-term treasury bills.”
- Lan also added that the yellow metal would look to consolidate in the near term and is currently doing so at around $1,940-$1,960 per ounce.
ANZ Research analysts said in a note that the “Geopolitical risk and inflation pressure are currently the two primary drivers for the gold market. An aggressive Fed rate hike of 75 bps could be a short-term price damper, while elevated inflation due to supply shocks could mitigate the negative impact.”
In other precious metals, silver is down 0.37%, currently trading at $25.18 an ounce. Platinum is down 0.52%, currently trading at $982.60 an ounce. Palladium is down 0.05%, currently trading at $2,447.77 an ounce, as of the time of this writing.