Gold prices surged on Tuesday after inflation pressure continued. The boost was aided by a decline in U.S. treasury yield.
Spot gold climbed 0.69% to close at $1,853.72 per ounce. The bullion touched $1,836.10, which was the lowest since 1st June when gold futures rose 0.68% to close at $1,856.3.
Kitco Metals Senior Analyst notes,
“Gold is being supported by rising worries about inflation, which is historically a bullish element for the metals markets.”
Worth noting that bond yields and stocks around the world fell from highs of a 50-basis point rate increase in Australia. This raised concern about the policy tightening as the ECB meeting takes place this week.
Even though gold is often viewed as a hedge against inflation, an increase in interest rates pose a threat translating to the high opportunity cost of having non-yielding bullion.
Wyckoff adds,
“Gold traders tend to read central bank meetings and monetary policy moves as a double-edged sword.”
On the same note, the U.S. treasury yields fell as risk appetite increased for safe-haven debt.
Traders are kept to observe the Inflation data expected this Friday for major clues on the Federal Reserve’s interest rate increase trajectory. As well, a half-point hike in interest rates is expected during the Federal Open Market Committee meeting to be held on June 14-15.
In a remark, T.D. Securities noted,
“The gap between gold and real rates may be attributed to both an undue rise in real rates given quantitative tightening and to the still-massive amount of complacent length being held in gold, keeping the yellow metal’s prices elevated.”
Meanwhile; Platinum fell 0.42% to close at $1,013.19 per ounce while Palladium fell 0.94% to $1,983.80 and Silver gained 0.84% to $22.24.
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