Gold & Silver

Gold prices in check as central banks rev up policy tightening

Reuters | Updated on: Jun 07, 2022

JP Morgan expects gold trading softer towards $1,800/oz in Q3

Gold prices held near one-week lows on Tuesday, as investors wagered that aggressive tightening plans by major central banks are going to keep interest rates higher for an extended time, boosting the U.S. Treasury yields and in turn the dollar.

Spot gold was flat at $1,840.16 per ounce, as of 0232 GMT. Earlier in the session, bullion slipped to $1,836.10, its lowest since June 1. U.S. gold futures also eased by 0.1% to $1,842.30. "The move higher in U.S. yields ahead of this week's U.S. bond auction is spooking gold investors ... The dollar is surging on the back of those higher yields," said Stephen Innes, managing partner at SPI Asset Management. The U.S. dollar was 0.2% higher as benchmark 10-year note yields climbed to their highest in nearly a month.

Analysts at JP Morgan expect gold trading softer towards an average of $1,800 an ounce in the third quarter amid an expected rebound in investor risk sentiment and a continued push higher in U.S. yields.

The U.S. Federal Reserve is on track for half-point interest rate increases in June, July, and last week's solid jobs report boosted expectations of continued tightening by the U.S. central bank. CPI report due on Friday is being awaited for further clues on the pace of U.S. rate hikes.

The European Central Bank also meets later this week as investors ramp up their bets on interest rate hikes this year. Higher rates dent gold's appeal as they increase the opportunity cost of holding non-yielding bullion. "Finally we are in a global central bank rate-hike environment, which is initially bad for gold, but of course rate hikes come with economic growth consequence, hence, gold remains gingerly," Innes said.

Elsewhere, platinum fell 0.6% to $1,011.21 an ounce and palladium was steady at $2,002.68. Silver slipped 0.4% to $21.96.

Published on June 07, 2022
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