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Gold dips as bond yields rise before Fed meeting

Economy May 01, 2022 10:50PM ET
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© Reuters. A vendor shows gold stud earrings at a jewellery showroom in Colombo, Sri Lanka, August 11, 2020. REUTERS/Dinuka Liyanawatte/Files

By Bharat Gautam

(Reuters) - Gold prices fell on Monday as elevated U.S. Treasury yields pressured demand for zero-yield bullion, ahead of a widely expected big interest rate hike by the Federal Reserve to contain rising inflationary pressures.

Spot gold retreated 0.4% to $1,888.56 per ounce, as of 0241 GMT. U.S. gold futures dropped 1.3% to $1,886.90.

The market is concerned that the Fed could be quite hawkish, pricing in a 50 basis point hike, and it could be 75 basis points in July, said Stephen Innes, managing partner at SPI Asset Management.

The U.S. central bank's Federal Open Market Committee is scheduled to begin its two-day meeting on interest rates on May 3 and announce its decision the next day.

Fed policymakers look set to deliver a series of aggressive rate hikes at least until the summer to deal with rapid inflation and surging labour costs, even as two reports released on Friday showed tentative signs that both may be cresting.

The Fed is still behind, and has constantly tried to keep up with these expectations, so there's a good chance they are looking at current inflation metrics, and "are going to continue to beat the hawkish drum," Innes said.

Benchmark 10-year U.S. Treasury yields rose towards recent multi-year peaks, pressuring demand for gold.

Higher short-term U.S. interest rates and bond yields tend to increase the opportunity cost of holding bullion, which yields nothing. Bullion is also seen as a safe store of value during times of economic and political crises.

Around 100 civilians evacuated from the ruined Azovstal steelworks in Mariupol were due to arrive in a Ukrainian-held city on Monday, Ukrainian President Volodymyr Zelenskiy said, after U.S. Speaker Nancy Pelosi made a surprise visit to Kyiv.

Spot silver fell 0.6% to $22.60 per ounce, platinum dipped 0.5% to $926.58, and palladium slid 2.2% to $2,268.48.

Gold dips as bond yields rise before Fed meeting
 

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Comments (9)
Ken Del
Ken Del May 02, 2022 8:50AM ET
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Gold is looking for a strong support floor before making its way back up.
humayoun nabi
humayoun nabi May 02, 2022 4:44AM ET
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gold will up on May 3rd
David Nadar
David Nadar May 02, 2022 2:59AM ET
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I think it will go till 1670 before making a new high
Vv Pp
Vv Pp May 02, 2022 2:21AM ET
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Buying gold in 21st century 🤣🤣🤣 what a joke
Baer Markit
Baer Markit May 01, 2022 11:48PM ET
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3.6% unemployment. We won't be close to a recession for years.
Rise Unlimited
Rise Unlimited May 01, 2022 11:48PM ET
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Deaths and unemployment fraud can produce useful numbers for bank tellers
Andrew Allen
Andrew Allen May 01, 2022 11:44PM ET
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no mention of gdp contraction for Q1. good luck raising rates into a recession
Sattar Langary
Sattar Langary May 01, 2022 11:36PM ET
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The masses are soon going to rise to protest because of inflation in the US and around the world! I dont know how people support their families...I doubt that the prices woukd come down unless the Biden administration takes serious and meaningful measures to bring prices dkwn and increase supplies.
jasim uddin
jasim uddin May 01, 2022 11:32PM ET
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I want to know what is the future of gold? it's price up or down???
Bill Nelson
Bill Nelson May 01, 2022 11:32PM ET
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Yes
jasim uddin
jasim uddin May 01, 2022 11:32PM ET
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I want to know what is the future of gold? it's price up or down???
Red Maple
Red Maple May 01, 2022 11:32PM ET
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it will go up some days and go down some days.
 
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