Gold up about 1% as US dollar, yields pull back

Oct 17 (Reuters) – Gold prices rose more than 1% on Monday after declines in the previous two sessions, as the US dollar and Treasury yields faltered, although risks from looming Federal Reserve interest rate hikes persisted.

Spot gold was up 0.9% at USD 1,656.25 per ounce by 1:41 p.m. ET (1741 GMT), having risen more than 1% earlier in the session and moving away from the more than two-week low touched in the last session.

US gold futures settled 0.9% higher at USD 1,664.

“The dollar’s significantly lower … yields are ticking lower,” said Bob Haberkorn, senior market strategist at RJO Futures, who also noted some “safe-haven demand with heightened geopolitical risks.”

Making bullion less expensive for overseas buyers, the dollar slipped 1.1%, while Treasury yields also retreated.

However, it’s going to be “a struggle for gold to rally even though there’s a lot of question marks out in the world. Investors want safety, but it’s hard not to go into Treasuries with rates going up as fast as they are,” Haberkorn added.

Gold faces headwinds as the Fed is expected to continue on its rate-hiking trajectory and increase its benchmark overnight interest rate by at least 75 basis points at its next policy meeting in November to curb stubbornly high inflation.

Gold prices have fallen 20% since scaling above the key USD 2,000 per-ounce level in March.

Even though gold is seen as a hedge against inflation, rising interest rates dim the appeal of the non-yielding asset.

“In the near term, however, the recovery in risk assets bolstered by signs of stabilising gilts is raising pressure on precious metal shorts, but gold prices need to break above USD 1,750/oz to extend the short squeeze,” TD Securities said in a note.

Elsewhere, spot silver climbed 2.5% to USD 18.72 per ounce after posting eight consecutive daily losses. Platinum rose 1.7% to USD 913.77 and palladium added 0.6% to USD 1,998.82.

“A surplus palladium market in 2023 should ultimately lead to lower palladium prices, although near term the market remains tight,” Heraeus Precious Metals said in a note.

(Reporting by Kavya Guduru in Bengaluru; Editing by Shounak Dasgupta and Paul Simao)