Gold slides to 2-week low on hawkish Fed signal, rising yields

  • U.S. 10-year yield rises to strongest since March 2021
  • Silver slips to three-week lows

Jan 6 (Reuters) - Gold prices slid to a two-week low on Thursday, pressured by rallying U.S. Treasury yields after the Federal Reserve signalled quicker increases to interest rates.

Spot gold was last down 1.2% at $1,788.25 an ounce by 13:47 ET (1847 GMT), after earlier hitting its lowest since Dec. 22. U.S. gold futures settled 2% lower at $1,789.20.

The primary focal point is the number of rate increases and how aggressive the Fed will be with its balance sheet runoff, which has put gold in a vulnerable position, said Ed Moya, senior market analyst at brokerage OANDA.

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If the movement in Treasury yields goes a lot higher in the short term, that is going to be very disruptive for gold trade, Moya added.

Gold, a non-interest-paying asset, tends to fall out of favour among investors when interest rates increase.

The Fed minutes released on Wednesday showed officials had discussed shrinking the central bank's overall asset holdings as well as raising rates sooner than expected to fight inflation. read more

Benchmark 10-year yields rose to their highest level since March last year.

Gold and silver prices are pressured as markets attempt to squeeze in a fourth rate hike for 2022, TD Securities said in a note, adding that constraints to money supply growth should further sap appetite for all collectibles including silver coins.

Spot silver dropped 2.9% to $22.12, its lowest level since Dec. 16. Platinum fell 2.3% to $959.91 and palladium dipped 0.5% to $1,874.26.

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Reporting by Kavya Guduru in Bengaluru; Additional reporting by Ashitha Shivaprasad; Editing by Ramakrishnan M. and Amy Caren Daniel

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