Gold prices firm on weaker bond yields, Fed minutes loom

Benchmark 10-year Treasury yields were pinned near their lowest in more than four months. Lower bond yields reduce the opportunity cost of holding non-interest bearing gold.

Market participants are now awaiting minutes from the Fed’s latest meeting, due at 1800 GMT, which could shed more light on the interest rate trajectory after a hawkish tilt by the U.S. central bank last month.

“I suspect that these (minutes) will just confirm the Fed is becoming relatively more hawkish, so (we) could see gold trading lower as a result,” ING’s Patterson said.

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion.

“Rising uncertainty around monetary policies, inflation and increasing risk of equity market volatility should favor safe-haven gold demand,” ANZ analysts said in a note.

“Central banks have increased gold purchases in recent months, offsetting some of the physical demand losses in Q2 2021.”

Spot gold may retest a support at $1,789 per ounce, a break below which could cause a fall to $1,774, according to Reuters technical analysts Wang Tao.

Elsewhere, silver was steady at $26.15 per ounce, palladium fell 0.2% to $2,787.67, and platinum slipped 0.5% to $1,086.38.