Gold steady as inflation woes offset firmer dollar, yields

Rate hikes tend to weigh on gold as higher interest rates raise the non-yielding metal's opportunity cost. PHOTO: REUTERS

BENGALURU (REUTERS) - Gold prices steadied on Tuesday (Nov 16), after rallying to a five-month peak in the previous session, as concerns over broadening inflationary risks kept bullion's safe-haven appeal intact in the face of a stronger United States dollar and elevated bond yields.

Spot gold was flat at US$1,862.81 per ounce, as at 1.40 am GMT. US gold futures were also flat at US$1,866.80.

Richmond Federal Reserve President Thomas Barkin said on Monday (Nov 15) the US Fed will not hesitate to raise interest rates if it concludes high inflation threatens to persist, but that central bank should wait to gauge if inflation and labour shortages prove to be more long-lasting.

Rate hikes tend to weigh on gold as higher interest rates raise the non-yielding metal's opportunity cost.

Bank of England Governor Andrew Bailey said he was very uneasy about the inflation outlook and that his vote to keep interest rates on hold earlier this month, which shocked financial markets, had been a very close call.

Tightening monetary policy now to rein in inflation could choke off the euro zone's recovery, European Central Bank President Christine Lagarde said on Monday, pushing back on calls and market bets for tighter policy.

Pressuring bullion, the dollar index held close to a 16-month high and benchmark US 10-year Treasury yields were near a three-week peak.

A stronger dollar makes gold more expensive for buyers holding other currencies, while higher yields increase the metal's opportunity cost.

Speculators raised their net long gold futures and options positions to 146,319 in the week ended Nov 9, the US Commodity Futures Trading Commission said on Monday.

Spot silver was steady at US$25.04 per ounce.

Platinum fell 0.1 per cent to US$1,085.54 and palladium dropped 0.6 per cent to US$2,142.19.

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