Gold firms on weak dollar; higher Treasury yields weigh

  • Traders await U.S. Federal Reserve Jan. 25-26 policy meeting
  • Investors likely to refrain from buying gold ahead of first U.S. rate hike- Commerzbank
  • Specs cut net long positions in gold- CFTC
  • U.S. markets closed for Martin Luther King Day

Jan 17 (Reuters) – Gold prices edged up on Monday after two sessions of losses as the dollar weakened, but rising expectations of monetary policy tightening in the United States lifted Treasury yields and kept bullion’s gains in check.

Spot gold rose 0.1% to $1,819.72 per ounce by 1045 GMT, while U.S. gold futures advanced 0.2% to $1,820.60.

“The euro is bit firmer against the U.S. dollar … so that is supportive for gold and also the other precious metals. On the other side, yields are slightly up, which is dampening the impact of a weaker U.S. dollar,” said Quantitative Commodity Research analyst Peter Fertig.

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The dollar retreated, making bullion cheap for overseas buyers, while U.S. 10-year Treasury yields hit two-year highs last week on rate hike expectations.

U.S. markets are closed on Monday for a public holiday.

The focus is now on the U.S. Federal Reserve’s Jan. 25-26 meeting after policymakers signalled last week that they would start raising interest rates in March to tame surging inflation. read more

“In our opinion, market participants are likely to refrain from buying gold ahead of the U.S. Fed’s first rate hike,” Commerzbank analysts wrote in a note.

“They may be hoping that the Fed’s meeting next week will give them further and/or clearer signals that the Fed will be commencing its rate hike cycle in March.”

Gold is considered an inflationary hedge, but the metal is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion.

Reflecting investor sentiment in gold, speculators cut net long COMEX gold position by 7,083 contracts to 87,859 in the week to Jan. 11, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

Spot silver rose 0.3% to $23.02 an ounce, platinum fell 0.2% to $968.48 and palladium was up 0.6% at$1,888.76.

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Reporting by Seher Dareen and Swati Verma in Bengaluru; Editing by Aditya Soni

Our Standards: The Thomson Reuters Trust Principles.

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