Gold retreats as dollar, bond yields resume climb

Aug 2 (Reuters) – Gold prices slipped on Wednesday as the dollar rose and bond yields strengthened after data showed US private payrolls increased more than expected in July.

Spot gold was down 0.4% at USD 1,935.77 per ounce at 2:45 p.m. EDT (1845 GMT), after rising as much as 0.6% earlier on some safe-haven bids after ratings agency Fitch downgraded the US government’s credit rating to AA+ from AAA.

US gold futures settled 0.2% lower at USD 1,975.

“Higher interest rates would ultimately put pressure on gold. Also, we are seeing more strength in the dollar. Prices are trapped below USD 2,000 and above USD 1,900 for the time being,” said Daniel Pavilonis, senior market strategist at RJO Futures.

The dollar rose 0.3% to more than a three-week high, making gold more expensive for holders of other currencies. Benchmark US 10-year Treasury yields climbed to their highest level since November 2022.

US private payrolls rose by 324,000 jobs last month, the ADP National Employment Report showed, well above the increase of 189,000 that economists polled by Reuters had forecast.

The Federal Reserve raised interest rates by 25 basis points last week. According to the CME’s FedWatch Tool, the probability that the US central bank would leave rates unchanged at its Sept. 19-20 meeting was at 83%.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

“Traders and investors are not badly shaken over the surprise Fitch news, but it did somewhat deflate heretofore upbeat marketplace attitudes that had recently pushed US stock indexes to new highs for the year,” Jim Wyckoff, senior market analyst at Kitco, wrote in a note.

All eyes are on the release on Friday of the US nonfarm payrolls report for July. Overall payrolls are forecast to rise by 200,000, after increasing by 209,000 in June.

Elsewhere, spot silver fell 2.5% to USD 23.72 per ounce, platinum dropped 1.1% to USD 921.10 and palladium gained 0.1% to USD 1,240.74.

(Reporting by Brijesh Patel and Deep Vakil in Bengaluru; Editing by Shilpi Majumdar, Paul Simao, and Maju Samuel)