Gold gains as Treasury yields dip; hawkish Fed caps upside

Gold prices edged higher on Thursday as Treasury yields retreated, although gains were limited after stronger U.S. economic data bolstered expectations the Federal Reserve will retain its hawkish narrative.

Fundamentals

Spot gold was up 0.2% at $1,719.19 per ounce, as of 0144 GMT.

U.S. gold futures rose 0.5% to $1,728.50.

Benchmark U.S. 10-year Treasury yields eased after recording its biggest one-day jump since Sept. 26 on Wednesday, while the dollar index was steady.

Lower yields decrease the opportunity cost of holding gold, which pays no interest.

San Francisco Federal Reserve President Mary Daly on Wednesday underscored the U.S. central bank’s commitment to curbing inflation with more rate hikes, even as she said the Fed will not simply barrel ahead if the economy starts to crack.

On Wednesday, the ADP National Employment report showed private employers increased hiring last month, while separately the Institute for Supply Management’s (ISM) non-manufacturing PMI reading came in slightly above expectations, suggesting underlying strength in the economy despite rising interest rates.

Investors are likely to shift focus to U.S. nonfarm payrolls data due on Friday.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.18% to 946.34 tons on Wednesday, their third straight day of inflows.

Spot silver fell 0.3% to $20.64 per ounce, platinum was steady at $919.11 and palladium rose 0.7% to $2,262.32.