Gold prices on back foot as US dollar, yields firm on rate-hike bets

Gold prices were subdued on Tuesday by a stronger dollar and elevated bond yields as investors remained on the sidelines ahead of U.S. inflation data later this week that could offer more clarity on the U.S. rate hike path.

Spot gold eased 0.2% to $1,664.13 per ounce, as of 0927 GMT, after earlier touching its lowest since Oct. 3.

U.S. gold futures slipped 0.2% to $1,672.50.

"It's hard to create a bullish case for gold," considering peak inflation may be yet to come, with rate hikes likely to continue until such a scenario, said Craig Erlam, senior market analyst at OANDA.

"It's just not the ideal environment for gold. We're seeing a rebound in the dollar and in yields and gold has been punished as a result."

While gold is considered a hedge against inflation and economic uncertainties, rising rates reduce the non-yielding bullion's appeal.

The dollar index scaled a near two-week peak, making gold more expensive for buyers holding other currencies. Benchmark U.S. 10-year Treasury yields were just shy of 4%.

After stronger-than-expected U.S. labour data, focus shifts to Thursday's inflation reading, which is expected to remain stubbornly high and reinforce the Federal Reserve's hawkish rhetoric.

Gold has shed nearly 20% since rising above the key $2,000 mark in March, as the safe haven failed to shine despite geopolitical uncertainty and a recent rout in equities as most investors sought refuge in the dollar instead. [MKTS/GLOB]

Silver fell 1.6% to $19.33 per ounce and platinum lost 1.1% to $888.73. Palladium, meanwhile, rose 0.7% to $2,187.01.

Citi analysts said in a note that they were relatively bullish on palladium, citing resilient demand on increasing automotive chip supply availability, automotive supply chain re-stocking and rising Russia supply risks.

Prices of palladium, used in emission-controlling devices in cars along with platinum, have risen about 15% so far this year.

 

(Reporting by Brijesh Patel in Bengaluru; Editing by Shailesh Kuber)