Gold prices in check as central banks rev up policy tightening

Gold prices held near one-week lows on

Tuesday, as investors wagered that aggressive tightening plans

by major central banks are going to keep interest rates higher

for an extended time, boosting the U.S. Treasury yields and in

turn the dollar.

Spot gold was flat at $1,840.16 per ounce, as of 0232

GMT. Earlier in the session, bullion slipped to $1,836.10, its

lowest since June 1. U.S. gold futures also eased by 0.1%

to $1,842.30.

“The move higher in U.S. yields ahead of this week’s U.S.

bond auction is spooking gold investors … The dollar is

surging on the back of those higher yields,” said Stephen Innes,

managing partner at SPI Asset Management.

The U.S. dollar was 0.2% higher as benchmark 10-year note

yields climbed to their highest in nearly a month.

Analysts at JP Morgan expect gold trading softer towards an

average of $1,800 an ounce in the third quarter amid an expected

rebound in investor risk sentiment and a continued push higher

in U.S. yields.

The U.S. Federal Reserve is on track for half-point interest

rate increases in June, July, and last week’s solid jobs report

boosted expectations of continued tightening by the U.S. central

bank.

CPI report due on Friday is being awaited for further clues

on the pace of U.S. rate hikes.

The European Central Bank also meets later this week as

investors ramp up their bets on interest rate hikes this year.

Higher rates dent gold’s appeal as they increase the

opportunity cost of holding non-yielding bullion.

“Finally we are in a global central bank rate-hike

environment, which is initially bad for gold, but of course rate

hikes come with economic growth consequence, hence, gold remains

gingerly,” Innes said.

Elsewhere, platinum fell 0.6% to $1,011.21 an ounce

and palladium was steady at $2,002.68. Silver

slipped 0.4% to $21.96.

(Reporting by Swati Verma in Bengaluru; Editing by Rashmi Aich

and Sherry Jacob-Phillips)