Gold rises as weaker dollar boosts bullion appeal, higher yields cap gains

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Gold prices gained on Thursday as the

dollar weakened after an interest rate hike by the U.S. Federal

Reserve, making bullion cheaper for overseas buyers, but higher

Treasury yields capped gains.

Spot gold rose 0.4% to $1,936.26 per ounce by 0805

GMT, after touching its lowest since Feb. 28 at $1,894.70 on

Wednesday. U.S. gold futures rose 1.3% to $1,934.20.

The dollar index weakened, making gold less expensive for

other currency holders after the U.S. central bank moved to a

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hawkish monetary policy in a pivot from battling the coronavirus

pandemic to countering the economic risks posed by excessive

inflation and the war in Ukraine.

Fed’s decision lifted the U.S. 10-year Treasury yields

to their highest since May 2019 in the previous

session.

Greenback-priced gold is highly sensitive to rising U.S.

interest rates, as they increase the opportunity cost of holding

non-yielding bullion.

“The move in dollar and stocks was much more aggressive than

the move in gold. And that’s probably the Ukraine risks still

lingering, where it’s not the all-clear yet,” said Ilya Spivak,

a currency strategist at DailyFX.

Ukrainian President Volodymyr Zelenskiy said negotiations

were becoming “more realistic” and Russia said proposals under

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discussion were “close to an agreement.”

Holdings of the world’s largest gold-backed exchange-traded

fund, SPDR Gold Trust, rose 0.8% to its highest since March 2021

at 1,070.53 tonnes on Wednesday.

Palladium , used by automakers in catalytic converters

to curb emissions, rose 2.4% to $2,465.52 per ounce.

The metal hit a record high of $3,440.76 on March 7, driven

by fears of supply disruptions from top producer Russia.

Spot silver climbed 0.6% to $25.22 per ounce, while

platinum fell 0.1% to $1,016.44.

(Reporting by Asha Sistla in Bengaluru; Editing by Sherry

Jacob-Phillips and Vinay Dwivedi)