Gold gains more than 1% as US dollar, yields pull back; palladium gains 3%

By Arundhati Sarkar

(Reuters) - Gold prices jumped more than 1% on Thursday as a pullback in the dollar and U.S. Treasury yields provided support ahead of a key U.S. jobs report that could influence the Federal Reserve's policy stance.

Spot gold was up 1% at $1,781.83 per ounce by 1128 GMT, While U.S. gold futures rose 1.2% to $1,798.20.

There are factors building that could be supportive to gold in the short term, including recession concerns, OANDA analyst Craig Erlam said.

"The Fed is really out in force this week trying to reinforce its message about the possibility of a larger September hike and not quickly reversing course next year, but investors seem keen to push back against that idea."

Some U.S. central bank officials have voiced their determination to rein in high inflation, although one noted a half-percentage-point hike in its key interest rate next month might be enough to march towards that goal.

Gold is highly sensitive to higher interest rates as they increase the opportunity cost of holding non-yielding bullion.

Benchmark U.S. 10-year Treasury yields slipped from their highest levels in more than a week, while the dollar also eased. [US/] [USD/]

Meanwhile, the Bank of England raised interest rates by the most in 27 years, despite warning that a long recession is on its way.

"Don't expect a UK rate hike to be of much impact (to gold), except to maybe raise concerns about a central bank raising rates into a recession, prompting fears of a deeper economic fall," said independent analyst Ross Norman.

"Geopolitical concerns around Taiwan will certainly be adding to the modest gold gains this morning," Norman added.

Investors are now focusing on the U.S. jobs data due on Friday.

Elsewhere, spot silver rose 1.1% to $20.26 per ounce, platinum gained 1% to $907.00, and palladium jumped 1.7% to $2,051.00.

 

(Reporting by Arundhati Sarkar in Bengaluru; editing by Jason Neely)