Gold prices firm on weaker bond yields, Federal Reserve's minutes loom

By Brijesh Patel

(Reuters) - Gold prices held firm near the key $1,800/ounce psychological level on Wednesday, helped by a drop in U.S. Treasury yields, while investors awaited minutes from the Federal Reserve's June meeting for more clues on its policy outlook.

Spot gold was up 0.1% at $1,797.84 per ounce, as of 0500 GMT, after hitting its highest since June 17 at $1,814.78 on Tuesday.

U.S. gold futures rose 0.3% to $1,799 per ounce.

"A fall in treasury yields is certainly providing some support to gold, whilst we are also seeing some slight weakness in the U.S. dollar during early morning trading, which will also help," said ING analyst Warren Patterson.

Benchmark 10-year Treasury yields were pinned near their lowest in more than four months. Lower bond yields reduce the opportunity cost of holding non-interest bearing gold. [US/]

Market participants are now awaiting minutes from the Fed's latest meeting, due at 1800 GMT, which could shed more light on the interest rate trajectory after a hawkish tilt by the U.S. central bank last month.

"I suspect that these (minutes) will just confirm the Fed is becoming relatively more hawkish, so (we) could see gold trading lower as a result," ING's Patterson said.

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion.

"Rising uncertainty around monetary policies, inflation and increasing risk of equity market volatility should favour safe-haven gold demand," ANZ analysts said in a note.

"Central banks have increased gold purchases in recent months, offsetting some of the physical demand losses in Q2 2021."

Spot gold may retest a support at $1,789 per ounce, a break below which could cause a fall to $1,774, according to Reuters technical analysts Wang Tao.

Elsewhere, silver was steady at $26.15 per ounce, palladium fell 0.2% to $2,787.67, and platinum slipped 0.5% to $1,086.38.

 

(Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu)