Gold firms on dollar pullback, but hinges on rate-hike fears

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Gold prices rose on Tuesday as the

dollar slipped, although the metal languished near a 2-1/2-year

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low as prospects of further aggressive rate hikes by the U.S.

Federal Reserve kept some investors on the sidelines.

Spot gold was up 0.6% at $1,631.39 per ounce, as of

0512 GMT, after hitting its lowest since April 2020 at $1,620.20

on Monday. U.S. gold futures edged 0.3% higher to

$1,638.70.

The dollar index dipped 0.1%, easing off a two-decade

peak scaled in the previous session. The benchmark 10-year

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Treasury yield was also slightly off a 12-year peak

marked on Monday.

Slightly lower U.S. yields and dollar may have provided some

room for gold prices to stabilize after its recent sell-off,

said IG market strategist Yeap Jun Rong.

“The prevailing upside risk to inflation and, hence,

monetary policy tightening, still remains a key obstacle

limiting gold’s upside,” he said.

Fed officials on Monday sloughed off rising volatility in

global markets and said their priority remained controlling

inflation.

Gold prices have declined more than 20% since rising above

the key $2,000 level in March, as rapid U.S. rate hikes made the

non-yielding bullion less attractive and also pushed the dollar

to multi-year highs.

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“Its (gold’s) status as a haven asset in times of economic

distress has failed to stem the flow of selling,” analysts at

ANZ said in a note.

Indicative of investor sentiment, holdings of SPDR Gold

Trust , the world’s largest gold-backed exchange-traded

fund, fell to 30,333,443 ounces on Monday, its lowest since

March 2020.

Spot gold may bounce further to $1,639 per ounce, as a

wave 3 may have completed around a support of $1,619, according

to Reuters technical analyst Wang Tao.

Spot silver rose 1% to $18.51 per ounce, platinum

climbed 0.2% to $853.89 and palladium was up 0.2%

at $2,049.10.

(Reporting by Eileen Soreng in Bengaluru; Editing by Rashmi

Aich, Subhranshu Sahu and Sherry Jacob-Phillips)