Gold Prices Firm on Weaker Bond Yields

On Wednesday, gold prices held firm near the vital USD 1,800/ounce psychological level. It received support from a drop in US Treasury yields, as investors awaited minutes from the Federal Reserve’s June meeting for more clues on the Fed’s policy outlook.

As of 05:00 GMT, spot gold was up 0.1 percent at USD 1,797.84 per ounce, after reaching its highest level since June 17 at USD 1,814.78 on Tuesday. Gold futures in the United States rose 0.3 % to USD 1,799 per ounce.

“A drop in treasury yields is certainly helping gold, and we are also seeing some slight weakness in the US dollar during early morning trading, which will also help,” ING analyst Warren Patterson said.

Treasury Yields

Benchmark Ten-year Treasury yields were near their lowest level in more than four months. Bond yields that are lower reduce the opportunity cost of holding non-interest-bearing gold. Market participants are now awaiting minutes from the Fed’s most recent meeting. It is due at 18:00 GMT and could shed more light on the interest rate trajectory following the US central bank’s hawkish tilt last month.

“I suspect that these (minutes) will simply confirm that the Fed is becoming relatively more hawkish, and as a result, gold may trade lower,” ING’s Patterson predicted. Rising US interest rates increase the opportunity cost of holding non-yielding bullion, making gold extremely volatile.

According to ANZ analysts, rising monetary policy uncertainty, inflation, and the increasing risk of equity market volatility should favor safe-haven gold demand. “In recent months, central banks have increased gold purchases, offsetting some of the physical demand losses in Q2 2021.”

According to Reuters technical analysts Wang Tao, spot gold may retest a support level of USD 1,789 per ounce. This would be a break below, which could lead to a drop to USD 1,774.

Silver

The price faced stiff resistance near Rs 71,100. Due to this, the MCX silver price lost its earlier gains and closed the day with losses. Meanwhile, the price is hovering near the midpoint of the Bollinger band at Rs 69,450, limiting the price’s downside.

Base metals prices rose on Wednesday as most metals maintained firm trading ranges after digesting weak US data. Previously, base metals fell as a result of disappointing US service PMI data and a dollar rally.