E-Paper
Gold recoups losses as US yields slip after CPI data
Gold's status as an inflation hedge has been challenged by higher bond yields, which translate into a higher opportunity cost of holding non-yielding bullion.
Gold erased earlier losses to hit a one-week high on Wednesday, as US Treasury yields eased after subdued inflation data.
Spot gold rose 0.2% to $1,718.21 per ounce by 12:01 pm EST (1701 GMT), having bounced as high as $1,723.31. U.S. gold futures eased 0.1% to $1,715.70.
"Gold is still taking cues from the Treasury market and today's data lessens worries about near-term inflation," said Edward Moya, senior market analyst at OANDA.
"If today's 10-year note sale has decent demand, gold prices could eventually make a run towards $1,730... The $1,700 level will provide key support... but that should hold unless the bond market selloff resumes," Moya said.
Ten-year US Treasury yields slipped after data showed US consumer prices increased in February, though underlying inflation remained tepid. [US/]
Gold's status as an inflation hedge has been challenged by higher bond yields, which translate into a higher opportunity cost of holding non-yielding bullion.
Prices fell to their lowest in nine-months on Monday, at $1,676.10.
Real rates have risen sharply over the last few weeks due to higher nominal rates, without a commensurate rise in inflation expectations, TD Securities wrote in a note.
"With massive Treasury issuance on the horizon, the pressure on higher rates should continue to weigh on precious metals in the near-term."
The US House of Representatives paved the way for a $1.9 trillion U.S. COVID-19 relief bill to be considered on Wednesday.
The European Central Bank is also grappling with a recent rise in yields, but policymakers remained divided on large-scale market intervention ahead of a policy meeting on Thursday.
Silver rose 0.3% to $25.98 an ounce. Palladium fell 0.1% to $2,293.75, while platinum jumped 2.2% to $1,194.44.
