Gold extends gains as Treasury yields rally comes to a halt

GOLD prices gained on Wednesday after a slight pullback in U.S. Treasury yields underpinned bullion above a key $1,900 level as investors await clues from major central bankers on whether the end to their monetary tightening cycle was imminent.

Spot gold firmed 0.3% to $1,902.49 per ounce by 0748 GMT, drifting further away from the five-month lows hit last week. U.S. gold futures rose 0.3% to $1,931.10.

A rally that took U.S. Treasury yields to nearly 16-year highs took a pause, giving some respite to the non-yielding gold.

Investors now await the Jackson Hole Symposium in Wyoming later this week, with a particular focus on Federal Reserve Chair Jerome Powell’s speech on Friday.

“Powell’s comments are expected to provide hints on the Fed’s thinking about the 2% inflation target and whether that target needs to be reviewed against the current backdrop of still elevated core inflation,” said Harshal Barot, a senior consultant at Metals Focus.

“If he does hint about a higher target, that could mean interest rates may not need to move any higher from here.”

The Fed must be open to the possibility that the economy will begin to reaccelerate rather than slow, with potential implications for their inflation fight, Richmond Fed President Thomas Barkin said on Tuesday.

If this trend of strong U.S. economic data and sticky inflation readings continues, gold is likely to experience further downside pressure, said Kirill Kirilenko, a senior analyst at London-based consultancy CRU.

“This could in turn suggest that the Fed may decide to maintain interest rates higher for longer, or even hike them again to ensure inflation won’t flare up again.”

SPDR Gold Trust, the world’s largest gold-backed ETF, said holdings slid back to their lowest levels since mid-January 2020.

In other metals, spot silver gained 1.3% to $23.69 per ounce and platinum added 0.6% to $923.92. Palladium was up 0.1% at $1,261.06. – Reuters