Gold inches up as easing bond yields offset firm dollar

Spot gold was steady at $1,711.61 per ounce

  
Gold bars are pictured on display at Korea Gold Exchange in Seoul, South Korea, August 6, 2020. Image used for illustrative purpose.

Gold bars are pictured on display at Korea Gold Exchange in Seoul, South Korea, August 6, 2020. Image used for illustrative purpose.

REUTERS/Kim Hong-Ji

Gold inched up on Thursday, buoyed by a temporary reprieve in U.S. Treasury yields, but a firm dollar limited bullion's advance and kept it near a nine-month trough.

Spot gold was up 0.5% at $1,719.67 per ounce at 1228 GMT, having dropped on Wednesday to its lowest since June 9 at $1,701.40. U.S. gold futures rose 0.1% to $1,717.70.

U.S. gold futures were down 0.2% at $1,712.70 per ounce.

The U.S. dollar rose 0.3% against key rivals, making gold more expensive for investors holding other currencies.

U.S. Treasury yields inched down but were still at elevated levels, while Germany's 10-year yield also eased. 

"You have two conflicting forces," Quantitative Commodity Research analyst Peter Fertig said.

"However it is still not an environment, currently, which would argue to be overweight in the precious metals," and rather than overall (yield) levels, it's more the change in the bond yields that would impact gold prices, Fertig added.

Gold is considered as a hedge against inflation which could result from massive economic stimulus measures, but that status has been threatened by higher bond yields, which increase the opportunity cost of holding bullion.

Investors awaited any remarks from U.S. Federal Reserve Chair Jerome Powell on the rapid rise in yields and clues on policy outlook when he speaks at a virtual Wall Street Journal Jobs Summit at 1705 GMT. 

The market will need more than "jawboning" if the Fed is serious about keeping interest rates low and the yield curve would continue to steepen in the absence of that, which is negative for gold, said Howie Lee, an economist at OCBC Bank.

Meanwhile, the U.S. Senate delayed a debate on a $1.9 trillion COVID-19 relief bill until at least Thursday. 

Silver fell 0.6% to $25.93 per ounce, while palladium slipped 0.5% to $2,341.68. Platinum fell 0.9% to $1,156.24.

(Reporting by K. Sathya Narayanan and Sumita Layek in Bengaluru Editing by Susan Fenton) ((Sathya.Narayanan@thomsonreuters.com; within U.S. +1 646 223 8780, outside U.S. +91 80 6182 2732; Reuters Messaging: sathya.narayanan.thomsonreuters.com@reuters.net))

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