Gold prices rise as US bond yields rise

  • 20 October, 2021
  • 1:50 pm EEST

Gold prices rose on Wednesday, with US bond yields rising, and concerns persisting about an earlier-than-expected interest rate hike.


Gold Prices Today

By 09:11 AM GMT (12:11 PM GMT), the price of gold futures for December delivery increased by 0.53%, to record $1779.80 an ounce.

The price for spot delivery of the yellow metal also increased by 0.53%, recording $1,778.64 an ounce.

Gold prices rose as much as 1.2% on Tuesday, before giving up most of those gains as Treasury yields rose.


US Bonds

US 10-year Treasury yields neared their highest level since May 20 on Wednesday, raising the opportunity cost of holding non-yielding bullion.

To offset higher yields, the dollar index was little changed, not far from Tuesday’s close which was at its lowest level in nearly a week, and a weaker dollar makes bullion cheaper for buyers holding other currencies.


Inflation Crisis

“Gold continues to consolidate, but once the Fed takes a more hawkish pivot, gold can shrug off higher inflation and a bearish trend,” said Stephen Innes, managing partner at SPE Asset Management.

If inflation continues to rise at its current pace in the next few months, Fed policymakers may need to adopt a “more aggressive policy response” next year, Fed Governor Christopher Waller said Tuesday.


Federal Reserve

Although persistent inflation will be a greater risk to the US economy over the next year, a majority of economists, in a Reuters poll, expect the Federal Reserve to wait until 2023 before raising interest rates.

Market participants are expecting the Federal Reserve to start reducing its asset purchases soon, as earnings season has been encouraging so far and recent data showed a strong increase in US consumer prices.

Gold is often seen as a hedge against inflation, although lower stimulus and higher interest rates push government bond yields higher.

ANZ analysts said in a note that while strong risk appetite weighed on bullion demand, retail investment remained strong, and physical advantage was strong during the festival season, supporting gold.


Metal Prices

The price of silver futures contracts for December delivery increased by 0.32%, to reach $23.96 an ounce.

The spot platinum price also rose by 0.3%, to record $ 1046.58 an ounce, while the spot palladium price declined by 0.17%, to record $ 2099.73 an ounce.

“Platinum appears to be in a better position than palladium given the combination of consumer, jewelry and industrial factors,” said ANZ analyst.

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