Gold prices retreated on Thursday as US Treasury yields drifted higher, with the expectation that the Federal Reserve will likely stay on course to raise interest rates in March.
Spot gold dipped 0.3% to $1,819.60 an ounce by 12:05 p.m. EDT, still trading close to a one-month high. US gold futures declined 0.4% to $1,818.30 an ounce in New York.
[Click here for an interactive chart of gold prices]
Meanwhile, the Dow rose after a slower rise in US producer prices in December fuelled hopes that inflation has potentially reached its peak. Gold’s retreat also came despite a subdued dollar, which makes bullion cheaper for overseas buyers.
Data shows initial claims for unemployment benefits in the US increased to 230,000 compared with expectations of 200,000 applications for the week ended January 8.
Ed Moya, a senior market analyst at brokerage OANDA, told Reuters that the overall gold market reaction to the employment data was rather muted since it did not change the narrative of what the Fed is likely to do in March.
But pressuring gold, equities saw a little more of a positive move with the PPI data mostly below expectations and a bump in jobless claims supporting the idea that it could possibly make the Fed pump the brakes on its “hawkish rhetoric,” Moya added.
Also weighing on gold, US Treasury yields edged higher, thus increasing the opportunity cost of holding non-yielding bullion. Investors prepared for an interest rate hike in March and at least two more by the end of 2022.
“Gold’s performance is in a way slightly disappointing, bearing in mind the pretty seismic collapse in the US dollar,” said Ross Norman, an independent analyst.
(With files from Reuters)