European Markets

Gold gains as dollar, yields ease; U.S. inflation data in focus

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  • ANZ sees gold at $1,600/oz by the end of 2022
  • Gold could trade in $1,770-$1,810 range until Fed meet- analyst

Dec 8 (Reuters) - Gold prices rose on Wednesday as the U.S. Treasury yields and the dollar eased, with investor focus shifting to key inflation data due this week that could influence the Federal Reserve's decision to taper its stimulus at a faster pace.

Spot gold was up 0.2% at $1,788.33 per ounce, as of 0352 GMT. U.S. gold futures were up 0.3% at $1,789.50.

Boosting bullion's appeal, benchmark 10-year and 30-year U.S. Treasury yields retreated from a one-week high hit on Tuesday while the dollar index (.DXY) weakened 0.2%.

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Lower yields reduce gold's opportunity cost while a weaker dollar decreases bullion's cost for holders of other currencies.

Bullion prices also got a lift after U.S. President Joe Biden threatened to impose "strong economic and other measures" on Russia if it invades Ukraine. read more

Gold, viewed as a safe-haven asset, tends to benefit from economic and political uncertainty.

"We've got this geopolitical issue bubbling in the background and that's driving a small bid in gold. But there's not a lot of fervour in the move and any breakout of the $1,770-$1,810 range ultimately hinges on the Fed's decision next week," Stephen Innes, managing partner at SPI Asset Management.

Investors also eyed Friday's U.S. Consumer Price Index (CPI) report, which could have a bearing on decision the Fed takes in its policy meeting on Dec. 14-15.

"Negative real interest rates could keep gold near $1,800 in H1-2022, but more downward pressure is likely to build after the Fed starts hiking interest rates in mid-2022," ANZ analysts said a note, adding that it expects gold to touch $1,600 per ounce by the end of next year.

Reduced stimulus and interest rate hikes tend to push government bond yields higher, raising the opportunity cost of holding gold, which bears no interest.

Spot silver rose 0.1% to $22.49 an ounce. Platinum gained 1.1% to $961.55 and palladium added 0.1% to $1,855.18.

(This story corrects period in paragraph 9 and first bullet.)

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Reporting by Nakul Iyer in Bengaluru; Editing by Subhranshu Sahu and Sherry Jacob-Phillips

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