Gold rebounds from 1-month lows as dollar cools

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Gold prices bounced off one-month lows on Thursday, as the dollar gave up most of its gains and as some investors seized the chance to pick up the bullion at relatively cheaper levels.

Spot gold firmed 0.4% to $1,842.67 per ounce by 2:45 p.m. ET (1945 GMT).

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U.S. gold futures rose 0.4% to settle at $1,851.80.

Following strong PPI data and a “compelling case for 50bps at the last meeting” from Cleveland Fed President Mester, gold made new lows, said Tai Wong, a senior trader at Heraeus Precious Metals in New York.

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However, two-year yields and the dollar moving to session lows triggered some short-covering in gold after the recent sharp, unpleasant drop, supporting bullion along with some short-term bargain-hunters looking for a quick scalp, Wong said.

Gold prices fell as much as 6.8% from near 10-month highs reached earlier this month to Thursday’s lows.

Data showed the U.S. producer price index bounced to 0.7%, higher than consensus forecast of 0.4%, while jobless claims data showed a resilient labor market.

Following the data, benchmark U.S. 10-year Treasury yields rose to over one-month peaks, while the dollar extended gains to a six-week high, making greenback-priced gold expensive for holders of other currencies.

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“Inflation appears to be slowing, but at too slow a pace – it’s possible that rates will have to remain higher for longer and that is not a positive context for gold,” said Daniel Ghali, commodity strategist at TD Securities.

Two additional rate hikes of 25 basis points are expected by the U.S. central bank in March and May. Financial markets are now betting on another increase in June.

Rising U.S. interest rates and bond yields increase the opportunity cost of holding zero-yield bullion.

Spot silver gained 0.4% to $21.71 per ounce, platinum rose 1% to $924.02, and palladium rose 4.2% to $1,525.39. (Reporting by Seher Dareen and Bharat Govind Gautam in Bengaluru; Editing by Tomasz Janowski, Maju Samuel and Shailesh Kuber)