Gold subdued as US Treasury yields stay firm; ECB, Fed verdict in focus

By Eileen Soreng

(Reuters) - Gold prices fell on Thursday as elevated U.S. Treasury yields dented bullion's appeal, while investors sought clarity on interest rate hike plans from the European Central Bank and the Federal Reserve.

Spot gold was down 0.3% at $1,847.90 per ounce as of 0956 GMT and U.S. gold futures had declined 0.3% to $1,850.50.

While the European Central Bank is expected to end its long-running asset purchase programme at the end of this month, investors are now focused on the size and pace of its policy tightening to combat soaring inflation. The central bank's policy decision is due at 1145 GMT.

A lot of people are starting to focus on stagflationary forces, particularly in Europe, said StoneX analyst Rhona O'Connell.

"Those elements are supportive in one way because they are testament to uncertainty about economic conditions ... But at the same time because it potentially means rising rates, there is an element of nervousness about whether that's going to have an effect on gold market sentiment."

The monthly U.S. consumer price index (CPI) data on Friday could signal whether the Fed will continue with its aggressive policy tightening even after July.

The two major physical gold markets of India and China are also quiet, O'Connell added. [GOL/AS]

Spot gold recorded its biggest monthly decline in eight months in May as rising interest rates increased the opportunity cost of holding non-yielding bullion, even though the metal is considered a safe haven amid political and economic uncertainties.

The benchmark U.S. 10-year Treasury yields held steady at the key 3% threshold, eroding gold's appeal. [US/]

"We'll probably have to wait until tomorrow's CPI report before we see a sustainable move in either direction, but we've taken comfort that ETF (exchange-traded fund) flows into gold yesterday were their strongest in a month," City Index senior market analyst Matt Simpson said. [GOL/ETF]

Spot silver dipped 0.4% to $21.95 per ounce, while platinum shed 2.1% to $985.31, while palladium was flat at $1,942.94.

 

(Reporting by Eileen Soreng in Bengaluru; Editing by Vinay Dwivedi)