Gold prices subdued by strong US retail sales, aggressive rate hike bets

Gold edged lower on Tuesday as robust U.S. retail sales data and expectations of aggressive interest rate increases outweighed support from a pullback in the dollar.

Spot gold fell 0.2% to $1,820.75 per ounce by 11:32 a.m. ET (1532 GMT), while U.S. gold futures rose 0.3% to $1,819.50 .

U.S. retail sales increased strongly in April suggested demand was holding strong despite high inflation and assuaged some fears that the economy was heading into recession.

Gold seems to have come under some pressure since the data, said Ryan McKay, a commodity strategist at TD Securities.

"Sentiment for the precious metals market is starting to turn more bearish. And that could spell bad news for gold here moving forward" with some more liquidations to come, especially as the Federal Reserve continues to sound a hawkish tone, McKay added.

Gold is considered a hedge against surging inflation, but rate hikes translate into higher opportunity cost of holding non-yielding bullion. [US/]

"Gold is behaving less like an arrow and more like a feather. It's drifting a little this way, and a little that way on the winds that drive markets," independent analyst Ross Norman said.

Limiting declines in gold, the dollar retreated, making bullion cheaper for holders of foreign currency. [USD/]

An uptick in gold earlier in the session, when it attempted to stage a rebound after sliding to 3-1/2 month lows on Monday, driven by the lower dollar and U.S. Treasury yields, was not "a shift in sentiment," Norman added. [US/]

Reflecting investor sentiment, holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, were at their lowest since early March. [GOL/ETF]

Spot silver rose 0.5% to $21.71 per ounce, moving further away from a trough since July 2020 hit on Friday.

Platinum was up around 1% at $955.82 per ounce while palladium rose 2.9% to $2,084.05, rising as high as 3% earlier.

 

(Reporting by Seher Dareen, Swati Verma and Roshan Abraham in Bengaluru; editing by Maju Samuel)