Gold Prices Today: Easing worries over US banking crisis, rising bond yields steal safe-haven appeal

Rise in yields increases the opportunity cost of holding gold as the precious metal does not fetch any interest.

Gold prices edged slightly lower as easing concerns about the banking crisis in the US, and a rise in yields on US Treasury bills weighed on the metal’s safe-haven appeal.

Yields on Treasury bills surged after the US Federal Reserve's head of banking supervision, Michael Barr, said in a testimony that the country’s banking system was resilient, and that the recent collapse of Silicon Valley Bank was a “textbook case of mismanagement”.

The comments by Barr indicated that the US Fed may still have some headroom to increase interest rates at their next policy meeting, which is bearish for gold.

Bond yields continued to extend gains with the two-year US Treasury note rising back above 4 percent on Tuesday, putting gold under pressure. Rise in yields increases the opportunity cost of holding gold as the precious metal does not fetch any interest.

“Risk appetite has improved and yields are rising so naturally, gold is giving back some of the banking panic gains it accumulated over the last few weeks,” Craig Erlam, Senior Market Analyst at OANDA, UK, said in a note.

“Even so, it isn’t trading too far from $2,000, seemingly a major psychological obstacle, and it’s well off its recent lows,” Erlam said.

Additionally, the US CB consumer confidence data released on Tuesday was also better than expected and supported market sentiments. This further hurt the safe-haven demand for precious metals.

“We expect gold and silver prices to remain volatile in today’s session and continue to hold their respective support levels. Gold has support at $1,978-1,964 (on COMEX), while resistance at $2,004-$2,015 per troy ounce. Silver has support at $23.10-$22.84, while resistance is at $23.70-$24.00 per troy ounce,” said Manoj Kumar Jain, director at Prithvi Finmart.

On the Multi Commodity Exchange of India (MCX), gold contracts have support at Rs 59,500-Rs 59,220 per 10 grams, while resistance at Rs 60,000-Rs 60,255 per 10 grams. For silver contracts, support is at Rs 70,000-Rs 69,550 per kilogram, and resistance at Rs 71,100-Rs 71,750 per kilogram.

As of 0507 GMT, US gold futures were at $1,984.40 per ounce, down 0.3 percent from the previous close.

At 1038 am, gold was down 0. 2 percent on the MCX at Rs 58,920 per 10 grams, while silver was down 0.2 percent at Rs 70,432 a kilogram.