Gold holds near 6-month low as higher US rates bite

GOLD prices were subdued on Thursday, having slid to their lowest in about six months in the last session, as an elevated U.S. dollar and Treasury yields continued to exert pressure on the non-yielding metal.

Spot gold was steady at $1,874.29 per ounce by 0939 GMT, hovering near its lowest level since March 13 hit on Wednesday. U.S. gold futures traded at $1,891.30.

The dollar held near 10-month highs against its major peers, while Treasury yields climbed to a 16-year peak as investors bet the U.S. economy will outperform its competitors in an environment of higher interest rates.

“Despite the Fed hiking rates, incoming data out of the U.S. remains solid,” said UBS analyst Giovanni Staunovo.

“Expectation that the Fed is not done and could do more is weighing on the gold price.”

Higher rates raise the opportunity cost of holding bullion, which does not yield interest, and support the dollar, in which it is priced.

Gold prices have shed more than 3% so far this month and are on track for their worst monthly showing since February. The metal fell 1.4% on Wednesday in its biggest daily decline since July.

Minneapolis Fed President Neel Kashkari on Wednesday said he is not yet ready to say rates have been lifted enough to get inflation back to the 2% target amid ample evidence of ongoing economic strength.

Data on Wednesday showed orders for long-lasting U.S. manufactured goods rose in August and business spending on equipment appeared to regain momentum.

Market focus now turns to the revised U.S. GDP growth rate for the second quarter and weekly jobless claims due later in the day, with the August personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, due on Friday.

Spot silver rose 0.1% to $22.54 per ounce, platinum added 0.3% to $889.63, while palladium gained 0.2% to $1,224.04. – Reuters