Gold hits 3-week high as US dollar, bond yields fall

Oct 4 (Reuters) – Gold prices rose over 1% to a three-week peak on Tuesday, as the dollar and US Treasury yields retreated, with investors hoping that the US Federal Reserve could adopt a less aggressive approach to rate hikes.

Spot gold gained 1.5% to USD 1,723.99 per ounce by 2:17 p.m. EDT (1817 GMT), its highest since Sept. 13.

US gold futures climbed 1.7% to USD 1,730.50.

Benchmark US 10-year Treasury yields eased, while the dollar extended its decline, making gold cheaper for other currency holders.

“The market is kind of pricing in that the Fed is going to back off here a little bit and that’s why you’re seeing this move back up in gold and silver,” said Bob Haberkorn, senior market strategist at RJO Futures.

Looking ahead, US non-farm payrolls data due on Friday could offer more clarity on the Fed’s policy tightening.

“If the jobs data comes out weaker-than-expected, gold will rally. If it comes out much stronger, the market might interpret that as well, the Fed can keep going here with rates,” Haberkorn added.

Gold registered its biggest daily percentage gain since March on Monday. However, rising US rates increase the opportunity cost of holding zero-yield bullion.

“Gold is not out of the woods yet, but at least we’ve seen a very strong rebound. The first move has been driven by short covering,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Gold-supplying banks have cut back shipments to India ahead of major festivals in favour of focusing on China, Turkey, and other markets where better premiums are offered, three bank officials and two vault operators told Reuters.

Spot silver rose 1.2% to USD 21.01 per ounce, a more than three-month high, following its best day since 2008 in the previous session.

Platinum gained 2.8% to USD 928.00, and palladium XPD= climbed 3.9% to a five-month high of USD 2,306.71.

(Reporting by Bharat Govind Gautam and Brijesh Patel in Bengaluru; Editing by Uttaresh V, Shailesh Kuber and Krishna Chandra Eluri)