Gold up on hopes for continued low rates, firm yields cap gains

U.S. gold futures eased 0.2% to $1,818.80

  
Gold bars are seen at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna, Austria, March 18, 2016. Image used for illustrative purposes.

Gold bars are seen at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna, Austria, March 18, 2016. Image used for illustrative purposes.

REUTERS/Leonhard Foeger

Gold edged up on Thursday on hopes that the U.S. Federal Reserve would not raise interest rates anytime soon, although a jump in U.S. Treasury yields following a strong rise in April consumer prices capped gains.

Spot gold was up 0.2% at $1,818.22 per ounce by 0318 GMT, after falling more than 1% in the previous session.

U.S. gold futures eased 0.2% to $1,818.80.

"We're still getting on the aftershock of that consumer price index release and the expectations now from the market that the Fed will be forced to do something about inflation," IG Market analyst Kyle Rodda said.

The Fed, however, has been reiterating that inflation will be so transitory that it won't have to worry about adjusting interest rates, he added.

Data on Wednesday showed U.S. consumer prices increased by the most in nearly 12 years in April, intensifying concerns over rising inflation. 

Fed Vice Chair Richard Clarida said the twin surprises of weak jobs growth and strong inflation in April has not dented the U.S. central bank's plans to keep its support for the economy wide open. 

Lower U.S. interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.

However, worries over rising inflation lifted benchmark U.S. 10-year Treasury yields to their highest in more than a month, while the dollar held firm. 

"The stronger dollar and higher U.S. rates punished the precious metals group (yesterday)," ED&F Man Capital Markets analyst Edward Meir said in a note.

"Although we suspect that this weakness will prove to be short-lived given rising inflationary expectations and a Fed that at least for now, does not seem to be too eager to raise rates."

Palladium gained 0.9% to $2,882.69 per ounce. Silver was steady at $27.04 per ounce, while platinum was up 0.6% at $1,217.01.

(Reporting by Shreyansi Singh in Bengaluru; Editing by Rashmi Aich and Vinay Dwivedi) ((Shreyansi.Singh@thomsonreuters.com; +91 8061823666/3590 (If within U.S. call +1 646 223 8780); Reuters Messaging: Shreyansi.Singh@thomsonreuters.com))

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