Gold subdued on strong dollar, yields; hawkish Fed clouds outlook

Sept 22 (Reuters) – Gold prices edged lower in choppy trading on Thursday, pressured by a stronger dollar and higher Treasury yields, while the US Federal Reserve’s hawkish policy stance clouded the outlook for the non-yielding bullion.

Spot gold was down 0.2% at USD 1,671.20 per ounce by 1:46 p.m. EDT (1746 GMT), after shedding more than 1% earlier in the session.

US gold futures settled 0.3% higher at USD 1,681.10.

“(Gold’s) weakness is coming because the dollar’s stronger (and) yields are a little higher… the overall outlook for the Fed is more rate hikes, which is going to put a limit on gold,” said Bob Haberkorn, senior market strategist at RJO Futures.

The dollar gained 0.5%, making greenback-priced bullion more expensive for overseas buyers. Benchmark 10-year US Treasury yields hit an 11-year high.

“Overall, the trend will continue to be negative for gold as the Federal Reserve told us yesterday that they’re quite determined to increase rates,” said Bart Melek, head of commodity strategy at TD Securities.

The US central bank, as widely expected, hiked its benchmark overnight interest rate by 75 basis points on Wednesday, and projected the policy rate would rise to the 4.25%-4.50% range by the end of 2022, and to a range of 4.50%-4.75% by the end of 2023.

Interest rate hikes to fight soaring inflation tend to raise the opportunity cost of holding zero-yield bullion.

“That, ultimately, gets gold below USD 1,600 – probably in the not too distant future,” Melek added.

Investors also took stock of US data showing initial claims for state unemployment benefits rose to 213,000 versus expectations for 218,000 applications for the latest week.

In other metals, spot silver was unchanged at USD 19.58 per ounce, platinum lost 0.8% to USD 900.68, while palladium added 0.6% to USD 2,166.82.

(Reporting by Kavya Guduru in Bengaluru; Editing by Paul Simao and Shailesh Kuber)