Gold rebounds as dollar retreat, Sino-US tensions offset higher bond yields

By Brijesh Patel

(Reuters) - Gold prices rose on Wednesday as a pullback in the dollar and Sino-U.S. tensions helped counter pressure from a rise in U.S. Treasury yields after hawkish comments from Federal Reserve officials on interest rate hikes.

Spot gold was up 0.4% at $1,766.59 per ounce, as of 0309 GMT. On Tuesday, bullion rose to a near one-month high of $1,787.79 before closing down 0.6% on the day.

U.S. gold futures slipped 0.5% to $1,780.80 per ounce.

The dollar fell 0.2% against its rivals after rising 0.8% overnight, making greenback-denominated gold less expensive for other currency holders. [USD/]

"Gold tested resistance around $1,785-$1,790 level overnight and got rejected... Also, the markets have become a little bit more sceptical about reversal of tightening from the Fed," said Ilya Spivak, a currency strategist at DailyFX.

"We also need to keep an eye on the Taiwan situation now, at times of geopolitical concerns gold does tend to find a bit of an appeal," he added.

A trio of Fed policymakers signalled on Tuesday that there would be no let up in the tightening campaign aimed at taming the highest inflation since the 1980s, even though it will take rates to a level that will more significantly curb economic activity.

These remarks lifted benchmark U.S. 10-year Treasury yields to 2.774% overnight and were around 2.71% in Asian session. [US/]

Although gold is considered a hedge against inflation, rising U.S. interest rates reduce the appeal of non-yielding bullion.

Indicative of sentiment, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.3% to 1,002.97 tonnes on Tuesday. [GOL/ETF]

Meanwhile, U.S. House of Representatives Speaker Nancy Pelosi addressed Taiwan's parliament on Wednesday and was due to meet with its president as well as human rights activists during a visit to the island that has infuriated Beijing.

Spot silver fell 0.2% to $19.91 per ounce, platinum gained 0.2% at $895.52, and palladium rose 1.2% to $2,087.66.

 

(Reporting by Brijesh Patel in Bengaluru; Editing by Rashmi Aich and Uttaresh.V)