Gold stays near 1-month lows as US dollar, yields hold ground

Aug 11  – Gold prices held near one-month lows on Friday, shrugging off cooler-than-expected U.S. inflation figures for last month, with bullion staying on course to wrap up its worst week in seven as the U.S. dollar and bond yields stood strong.

Spot gold edged 0.2% higher to USD 1,916.53 per ounce by 0727 GMT, but traded near its lowest level since July 7 touched earlier in the day. US gold futures GCcv1 were steady at USD 1,948.80.

Gold gained as much as 0.8% on Thursday after data showed the US consumer price index (CPI) climbed less than expected in July, raising bets that the Fed will unlikely hike interest rates again in 2023.

Interest rate increases tend to lift bond yields and in turn raise the opportunity cost of holding non-yielding bullion.

“Once the CPI dust had settled, markets seemed to remember that core CPI at 4.7% is still not great – even if it was slower than expected,” said Matt Simpson, a senior analyst at City Index, adding that gold’s move higher lacked conviction.

“We also had Fed member Mary Daly putting a fly in the dovish ointment, saying whether another hold or hike at the Fed’s next meeting is ‘yet to be determined’. And that saw the U.S. dollar regain its strength.”

Gold prices have slid about 1.3% so far in the week as the U.S. dollar index and benchmark 10-year Treasury bond yields were on track for their fourth consecutive weekly gain.

Moderating inflation and strong labour data present an ideal macroeconomic balance, pushing out the possibility of a hard landing, which diminishes safe-haven flows for gold and also supports a higher-for-longer rates scenario, ANZ analysts wrote in a note.

Spot silver rose 0.2% to $22.72 an ounce and platinum added 0.6% to USD 912.04. Still, both were on track for their fourth straight weekly loss.

Palladium was up 0.3% at USD 1,290.43, eyeing its best week since mid-June.

(Reporting by Swati Verma in Bengaluru; Editing by Sherry Jacob-Phillips and Subhranshu Sahu)