Metals

Gold firms near $1,800 level as U.S. bond yields drop

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Key Points
  • Spot gold rose 0.2% to $1,794.37 per ounce by 2:13 p.m. ET, after jumping to its highest level since June 17 at $1,814.78.
  • U.S. gold futures settled 0.6% higher at $1,794.2.
Canadian maple leafs sit on the faces of one ounce gold coins in London, the United Kingdom, on July 15, 2014.
Chris Ratcliffe | Bloomberg | Getty Images

Gold rose on Tuesday, bouncing above the key $1,800 level at one point, bolstered by a retreat in U.S. bond yields while investors watched for minutes from the Federal Reserve's last policy meeting to gauge interest rate trajectory.

Spot gold rose 0.2% to $1,794.37 per ounce by 2:13 p.m. ET, after jumping to its highest level since June 17 at $1,814.78. U.S. gold futures settled 0.6% higher at $1,794.2.

Benchmark U.S. Treasury yields hit a near two-week trough, boosting gold's allure as it tends to lower gold's opportunity cost.

"What we've seen in the last few days is central banks are dismissing the idea of raising interest rates prematurely," said Fawad Razaqzada, analyst with ThinkMarkets.

"Investors are realizing that monetary policy will remain historically very loose and that's one of the reasons why we're seeing bond yields go down, which is helping stabilize gold prices after falling sharply in June," Razaqzada said.

Focus is on minutes from the Fed's latest meeting, due on Wednesday, after a hawkish tilt from the U.S. central bank last month, in which policymakers projected a start to rate hikes in 2023, prompted gold to retreat below $1,800.

Gold regained some footing after data on Friday showed the U.S. unemployment rate ticked higher.

"We believe there is still mettle in the precious metals, as inflation should prove transitory, which implies that market pricing for Fed policy is too hawkish," TD Securities said in a note.

"With gold already managing to hold onto its uptrend, this scenario could ultimately catalyze a return of institutional interest which could see prices firm north of $1,900/oz."

In other metals, silver fell 1.3% to $26.10, having jumped to the highest level since June 17 at $26.76 per ounce.

Platinum fell 1.1% to $1,085.53, and palladium shed about 0.6% to $2,797.74.