Gold steady as demand offsets gains in dollar, higher yields

Published On: January 27, 2022Categories: Alternative Investments1.3 min read

Spot gold was unchanged at $1,816.41 per ounce, after finishing 1.6% lower on Wednesday in its worst session since Nov. 22

Gold held steady on Thursday following a sharp drop in the last session, as safe-haven demand driven by concerns over Ukraine countered gains in the U.S. dollar and Treasury yields as the Federal Reserve signalled interest rate hikes starting in March.

Spot gold was unchanged at $1,816.41 per ounce by 0324 GMT, after finishing 1.6% lower on Wednesday in its worst session since Nov. 22. U.S. gold futures dropped 0.7% to $1,816.20.

It’s confirmed that they’re (the Fed) going to raise rates. And that’s why we see the bump up in Treasury bills. And of course, people are selling gold, said Brian Lan, managing director at dealer GoldSilver Central, adding that bullion was also pressured by a sturdy dollar.

Fed Chairman Jerome Powell struck a hawkish tone on Wednesday, flagging a rate increase in March and saying there was room for further policy tightening without hurting employment.

U.S. Treasury two-year yields jumped to a 23-month high at the start of Asian trading on Thursday, while 10-year yields hovered near one-week highs touched in the previous session.

Higher yields and interest rate hikes dent the appeal of bullion by raising the opportunity cost of holding non-interest paying gold.

The dollar index rose to a level last seen on Nov. 22.

Heightened geopolitical tensions have spurred some safe-haven interest, but gold prices tend to hold their value rather than rally significantly amid such a flight to safety, said Standard Chartered analyst Suki Cooper.

Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose to a five-month high on Wednesday.

Spot silver declined 0.8% to $23.30 an ounce. Platinum dropped 1% to $1,021.00 and palladium lost 0.7% to $2,312.98.

About the Author: Jonathan Adams

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