Gold Up as Dollar Weakens, U.S. Bond Yields Rise

© Reuters.

By Gina Lee

Investing.com – Gold was up on Wednesday morning in Asia, with a softer dollar offsetting an uptick in U.S. bond yields. Fears also remain that interest rate hikes could come earlier than expected.

Gold futures were up 0.22% to $1774.35 by 12:56 AM ET (4:56 AM GMT).

The yellow metal climbed as much as 1.2% on Tuesday before a U.S. Treasury yields rally forced it to give up most of those gains. Benchmark 10-year Treasury yields hit their highest level since May 20, 2021, on Wednesday.

However, offsetting these higher yields was a weakening dollar, which inched down on Wednesday.

“Gold continues to hang in there, but I think the writing is on the wall and as soon as the U.S. Federal Reserve makes a more hawkish pivot, gold could ignore higher inflation and trend lower,” SPI Asset Management managing partner Stephen Innes told Reuters.

Meanwhile, if inflation keeps rising at its current pace in the next few months rather than subsiding as expected, Fed policymakers may need to adopt “a more aggressive policy response” in 2022, according to Fed Governor Christopher Waller.

Although persistent inflation is likely to be the biggest risk for the U.S. economy over the coming year, the Federal Reserve is widely expected to wait until 2023 before hiking interest rates, according to a Reuters poll.

Higher yields and an uptick in equity markets suggest markets are still optimistic about the health of the economy, posing another challenge for the safe-haven precious metal, said Innes.

In China, the loan prime rate released earlier in the day was unchanged at 3.85%. In other precious metals, silver gained 0.4%, while platinum was down 0.4% and palladium eased 0.4% to $2,089.68.