Gold prices buoyed by lower yields, virus woes; Fed meeting in focus

Gold prices rose on Monday, supported by easing U.S. bond yields and concerns over rising Delta variant infections, with investors eyeing the Federal Open Market Committee's meeting this week.

Spot gold rose 0.3% to $1,806.80 per ounce by 0649 GMT. U.S. gold futures climbed 0.3% to $1,806.70.

"There is no guarantee (that) we have gotten rid of this scourge (COVID-19) and this is continuing to keep safe-haven bid under gold simply because that could possibly keep central banks on the dovish side," said Stephen Innes, managing partner at SPI Asset Management.

Investors are unlikely to move back into gold in a big way unless the COVID-19 situation deteriorates quite significantly, Innes said.

COVID-19 cases continued to rise over the weekend with a number of countries in Asia and Europe battling to control the outbreak of the highly contagious Delta variant.

Benchmark 10-year Treasury yields dipped, reducing the opportunity cost of holding non-interest bearing gold.

Meanwhile, Asian shares skidded to their lows for this year as concerns over tightening regulations upended Chinese equities, driving investors towards safe-haven assets like gold.

The U.S. central bank's meeting on Tuesday and Wednesday is on the radar of investors. While no policy change is expected, they will look for clues on when the Fed might start reining in its easy monetary policies.

"Any indication that the Federal Reserve is hinting at cutting the stimulus can trigger some volatility in the market and (could bring) some more downside (in gold) because that will lead to strengthening of the U.S. dollar," said Kunal Shah of commodities trader Nirmal Bang Commodities in Mumbai.

The dollar index held close to a 3-1/2-month peak, hit last week, curbing bullion's appeal.

Elsewhere, silver gained 0.4% to $25.25 per ounce, palladium fell 0.4% to $2,662.71, and platinum gained 0.3% to $1,064.23.

 

(Reporting by Eileen Soreng and Arundhati Sarkar in Bengaluru; Editing by Subhranshu Sahu and Uttaresh.V)