Gold price falls 1% as higher dollar, yields curtail safe haven demand

Spot gold fell 1.1% to $1,935.48 an ounce by 11:45 a.m. ET, erasing most of its gains from the last two sessions. US gold futures were down 1.0% to $1,935.00 per ounce in New York.

Meanwhile, both the dollar index and US bond yields rose, driven by expectations that the US Federal Reserve will lead an aggressive wave of global central bank tightening.

The 10-year Treasury yields earlier moved past 2.5%, above a technical trend line that has served as a ceiling since the late 1980s, and are now at their highest since April 2019.

Wall Street banks increasingly expect the Fed to raise interest rates more aggressively than policymakers are projecting, with Citigroup economists now seeing four straight half-point moves amid persistent inflation. Money market traders see four smaller increases by the European Central Bank within a year.

“Weaker gold price can be attributed to the US dollar, which is continuing to appreciate. And on the other hand, bond yields are climbing further,” Daniel Briesemann, an analyst at Commerzbank AG, told Bloomberg.

Still, bullion is up almost 6% this year as Russia’s invasion of Ukraine continues to bolster demand for safe havens. Holdings in exchange-traded funds backed by the metal rose for a 10th straight week.

Jim Wycoff, senior analyst at Kitco Metals, told Reuters that he does not see a “serious downside price pressure for any of the (metal) markets in the near term because of inflation worries.”

“Anytime we have inflationary pressures like we’re seeing now, history shows that the metals markets have been sought after and I suspect that’s going to continue to be the case,” he added.