Gold trims gains as Treasury yields march higher

Oct 20 (Reuters) – Gold prices pared gains on Thursday, having risen about 1% on a softer dollar, as a jump in equities markets and rallying Treasury yields pulled bullion back toward three-week lows hit earlier.

Spot gold rose 0.1% to USD 1,629.75 per ounce by 1:51 p.m. ET (1751 GMT), earlier touching its lowest since end-September. US gold futures settled up 0.2% at USD 1,636.8.

“It is still our opinion that if rates continue to creep higher as they do, it will continue to lean on the gold market in the near term,” said David Meger, director of metals trading at High Ridge Futures.

“The focus continues to be clearly on interest rates and Fed rate-hike expectations.”

Fed Bank of Philadelphia President Patrick Harker said the central bank is not done with raising its short-term rate target amid high levels of inflation.

Higher US interest rates increase the opportunity cost of holding zero-yield bullion.

Yields on US Treasuries continued their relentless march higher after data showed the number of Americans filing new claims for unemployment benefits fell unexpectedly last week, strengthening expectations of a strong Fed rate hike.

Although separate data showed US existing home sales dropped for an eighth straight month in September.

“Gold prices have been more focused on the anticipation of what the Fed is gonna do next,” Jeffrey Sica, CEO of Circle Squared Alternative Investments, said.

“There’s now the thought that they are potentially slowing the economy… and they may back off this hawkish stance which is helping us today and could help us going forward. But it’s all very data dependent.”

The dollar index was down 0.2% against its rivals, while European shares rose after Liz Truss said she was resigning as the United Kingdom’s prime minister.

Elsewhere, silver rose 1.3% to USD 18.67 per ounce, platinum was up 3.1 % to USD 911.21, while palladium gained 3% to USD 2,060.48.

(Reporting by Seher Dareen in Bengaluru; additional reporting by Swati Verma; Editing by Devika Syamnath and Shailesh Kuber)