July 20 (Reuters) – Gold edged lower on Wednesday as pressure from aggressive monetary policy worries and higher bond yields outweighed relief stemming from a pullback in the dollar.
Spot gold dipped 0.3% to USD 1,706.85 per ounce by 0610 GMT. US gold futures also fell 0.3% to USD 1,706.00.
The dollar eased for a fourth straight session, though it stayed at elevated levels, making greenback-priced bullion less expensive for buyers holding other currencies.
Gold seems to be the odd person out, not participating in any broader relief rally on a lower dollar, said Stephen Innes, managing partner at SPI Asset Management, adding that central banks’ front-loaded rate hikes are clearly tarnishing bullion’s appeal.
European Central Bank (ECB) policymakers are considering raising rates by a larger-than-expected 50 basis points at their meeting on Thursday to tame record-high inflation, two sources with direct knowledge of the discussion told Reuters.
Since the dollar is reacting to a (possibly) more aggressive rate hike by the ECB, gold isn’t getting the bounce one would typically expect via a softer greenback, Innes said.
Although gold is seen as an inflation hedge, higher interest rates and bond yields raise the opportunity cost of holding bullion, which yields no interest.
Benchmark US 10-year Treasury yields steadied after two sessions of gains.
Spot gold may retest a resistance at USD 1,721 per ounce, a break above which could lead to a gain into USD 1,728-USD 1,739 range, according to Reuters’ technical analyst Wang Tao.
Meanwhile, Asian shares extended a global rally as strong US corporate earnings and the expected resumption of Russian gas supplies to Europe helped lift sentiment and ease fears of a recession.
Spot silver was little changed at USD 18.74 per ounce, platinum was flat at USD 874.61, and palladium gained 0.5% to USD 1,884.66.
(Reporting by Bharat Govind Gautam in Bengaluru; editing by Uttaresh.V)