Gold prices fall as U.S. rate-hike bets lift dollar, bond yields


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Gold prices fell on Wednesday, as the

U.S. dollar and Treasury yields jumped after upbeat economic

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data bolstered expectations that the Federal Reserve will

maintain its stance to hike interest rates aggressively.

Spot gold was down 0.3% at $1,695.50 per ounce, as of

0541 GMT, having dropped to a one-week trough earlier in the

session.

U.S. gold futures dipped 0.4% to $1,706.10.

“ISM services reading reminded investors that there is still

some underlying momentum for this economy and it really kind of

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opens the door for the Fed to be even more aggressive with

fighting inflation,” said Edward Moya, senior analyst with

OANDA.

“The move in Treasuries is rather concerning and it could

really keep the pressure on gold.”

The U.S. services industry picked up again in August for a

second straight month amid stronger order growth and employment,

survey by the Institute for Supply Management showed on Tuesday.

The data boosted the greenback, with the dollar index

scaling a fresh 20-year peak, making gold more expensive for

overseas buyers.

Benchmark U.S. 10-year Treasury yields rose to

their highest level since June 16 on expectations the Fed will

keep hiking interest rates to tame soaring prices. Higher yields

raise the opportunity cost of holding non-yielding gold.

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The Fed is largely expected to deliver a 75 basis point rate

increase on Sept. 21. The U.S. central bank has raised its

benchmark overnight interest rate by 225 basis points in total

since March to fight soaring inflation.

Indicative of sentiment, holdings of SPDR Gold Trust ,

the world’s largest gold-backed exchange-traded fund, fell 0.21%

to 971.05 tonnes on Tuesday from 973.08 tonnes on Friday.

Spot gold might test a support at $1,685 per ounce, a break

below which could open the way towards $1,666-$1,673 range,

according to Reuters technical analyst Wang Tao.

Spot silver fell 0.6% to $17.94 per ounce, platinum

slipped 0.7% to $847.48 and palladium was 0.9%

lower at $1,989.17.

(Reporting by Eileen Soreng in Bengaluru; Editing by Sherry

Jacob-Phillips and Uttaresh.V)

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