Gold set for monthly loss as US Treasury yields, dollar strengthen

By Eileen Soreng

(Reuters) - Gold prices fell on Tuesday as an uptick in the dollar and U.S. bond yields overshadowed support from concerns over soaring inflation, with bullion on track to decline for a second straight month.

Spot gold fell 0.4% to $1,848.60 per ounce by 1025 GMT, and was down 2.5% for the month in its biggest decline since last September. U.S. gold futures dipped 0.2% to $1,852.70.

The U.S. dollar strengthened following hawkish comments by a senior Federal Reserve official causing gold to retreat, Ricardo Evangelista, senior analyst at ActivTrades said in a note.

Fed Governor Christopher Waller on Monday said the central bank should be prepared to raise interest rates by 50 basis points at every meeting from now on until inflation is decisively curbed.

The dollar index was up 0.2%, while the benchmark U.S. 10-year Treasury yields jumped as Waller's comments prompted markets to pare expectations that the Fed might pause for breath after hikes in June and July. [USD/][US/]

While gold is viewed as a hedge against inflation, rising U.S. interest rates increase the opportunity cost of holding non-yielding bullion and also boost the dollar in which gold is priced, making the metal expensive for overseas buyers.

"The current price action suggests that gold is waiting for a fresh directional catalyst," FXTM analyst Lukman Otunuga said.

After the latest data showed Euro-zone inflation rose to yet another record high in May, investors are now focused on the U.S. nonfarm payrolls data due later this week.

"A strong set of results in May could enforce fresh pressure on the Fed to maintain its aggressive approach towards rates," Otunuga added.

Silver fell 0.7% to $21.79 per ounce, and was down 4% for the month.

Platinum rose 0.3% to $961.36, and was set for its first monthly gain in three.

Palladium gained 1.5% to $2,062.81, but has declined 11% so far this month, the most since November.

 

(Reporting by Eileen Soreng in Bengaluru; Editing by Vinay Dwivedi)