Gold firms as softer dollar negates pressure from higher yields

Wednesday,   18-May-2022   08:09 AM (IST)

Gold prices edged higher on Wednesday, as a weakening dollar countered pressure from stronger Treasury yields and an aggressive stance on inflation by the U.S. Federal Reserve chief. A weaker dollar makes gold more attractive for buyers holding other currencies. Spot gold was up 0.1% at $1,816.56 per ounce, by 0106 GMT. U.S. gold futures dipped 0.2% to $1,814.50. The dollar extended its decline to a fourth day, pulling back from a recent two-decade high against a basket of major peers, as an uptick in investors' appetite for riskier bets diminished the U.S. currency's appeal. However, yields on the benchmark U.S. 10-year Treasury note steadied after a sharp rise in the previous session, capping demand for zero-yield gold. Fed Chair Jerome Powell on Tuesday pledged that the U.S. central bank would ratchet interest rates as high as needed to kill a surge in inflation that he said threatened the foundation of the economy. The Fed has raised its benchmark policy rate by three-quarters of a percentage point this year, and is on track to increase it again in half-percentage-point increments at its next two meetings in June and July. Although seen as an inflation hedge, bullion is sensitive to rising U.S. short-term interest rates and bond yields, which raise the opportunity cost of holding it. U.S. retail sales increased solidly in April as consumers bought motor vehicles amid an improvement in supply and frequented restaurants, showing no signs of demand letting up despite high inflation. Spot silver rose 0.2% to $21.66 per ounce, platinum gained 0.1% to $952.31, and palladium advanced 0.2% to $2,057.35.