Gold steady as dollar slide balances rate-hike fears

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Gold was little changed on Wednesday as

it failed to make the most of a pullback in the dollar, with

demand for bullion being restrained amid prospects of aggressive

monetary policies and rising U.S. bond yields.

Spot gold was flat at $1,711.00 per ounce by 0248

GMT. U.S. gold futures fell 0.1% to $1,708.80.

The dollar eased for a fourth straight session,

though it stayed at elevated levels, making greenback-priced

bullion less expensive for buyers holding other currencies.

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Benchmark U.S. 10-year Treasury yields rose, lowering the

appeal of non-yielding bullion.

Gold seems to be the odd person out, not participating in

any broader relief rally on a lower dollar, said Stephen Innes,

managing partner at SPI Asset Management, adding that central

banks’ front-loaded rate hikes are clearly tarnishing bullion’s

appeal.

European Central Bank (ECB) policymakers are considering

raising rates by a larger-than-expected 50 basis points at their

meeting on Thursday to tame record-high inflation, two sources

with direct knowledge of the discussion told

Reuters.

Since the dollar is reacting to a (possibly) more aggressive

rate hike by the ECB, gold isn’t getting the bounce one would

typically expect via a softer greenback, Innes said.

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Although gold is seen as an inflation hedge, higher interest

rates and bond yields raise the opportunity cost of holding

bullion, which yields no interest.

Australia’s top central banker on Wednesday indicated a

steady drum beat of interest rate rises were needed to stop a

damaging inflationary cycle developing.

Meanwhile, Asian shares extended a global rally on Wednesday

as strong U.S. corporate earnings and the expected resumption of

Russian gas supplies to Europe helped lift sentiment and ease

fears of a recession.

Spot silver firmed 0.2% to $18.77 per ounce, platinum

rose 0.5% to $879.02, and palladium climbed 1% to

$1,895.17.

(Reporting by Bharat Govind Gautam in Bengaluru; editing by

Uttaresh.V)