July 20 (Reuters) – Gold prices slipped from a two-month high on Thursday as the dollar and bond yields ticked higher, although hopes for a pause in rate hikes by the US Federal Reserve after July meeting limited the decline.
Spot gold was down 0.4% at USD 1,969.53 per ounce by 1:42 p.m. EDT (1742 GMT) after hitting its highest since May 17 earlier in the session.
US gold futures settled 0.5% lower at USD 1,970.90.
“The yields and dollar have actually bounced a little, so we’re seeing a slight reverse effect in gold. Also, this USD 2,000 area is going to be a bit of a challenge for the gold market in the short term,” said David Meger, director of metals trading at High Ridge Futures.
The dollar gained 0.6% against its rivals after US jobless claims data, making gold more expensive for other currency holders. Benchmark 10-year US Treasury yields also edged higher.
Data showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, touching the lowest level in two months amid ongoing labor market tightness.
Investor focus now shifts to the US central bank’s policy meeting next week, with markets pricing in a 25-basis-point rate hike from the Fed.
Most economists polled by Reuters expect that a hike at the July meeting would be the last increase of the current tightening cycle from the Fed.
Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion.
“The recent reversal in gold prices is very much driven by the expectation that the Fed is almost done in terms of interest rate hikes,” said Julius Baer analyst Carsten Menke.
“That said, we believe interest rates are set to stay high and a rapid reversal of monetary policy is not imminent due to the resilience of the US economy.”
Spot silver dropped 1.5% to USD 24.80, having hit its highest since mid-May. Platinum fell 1.8% to USD 955.51, while palladium slipped 2.3% to USD 1,278.02.
(Reporting by Brijesh Patel in Bengaluru; Editing by Shweta Agarwal and Maju Samuel)