Gold Retreats to 1-Week Low as Yields Rise Ahead of Fed
European markets slip with Fed, earnings in focus; Deutsche Bank up 6%
NEW YORK- Gold prices fell to a one-week low on Wednesday, pressured by a jump in U.S. Treasury yields and a firmer dollar ahead of the Federal Reserve policy decision later in the day.
Spot gold was down 0.7% at $1,764 per ounce, after dipping to its lowest since April 20 at $1,762.50.
We are seeing a scenario where the U.S. yields and dollar are recovering, which is negative for gold,” said Carlo Alberto De Casa, chief analyst, ActivTrades.
“If the Fed gives some direction to yields, there could be a significant move for gold. Otherwise, expect gold to remain in the $1,750-$1,800 range,” De Casa said.
Benchmark U.S. 10-year Treasury yields jumped to their highest since April 13, increasing the opportunity cost of holding bullion. The dollar index rose 0.1% against its rivals, making gold more expensive for holders of other currencies. Fed Chairman Jerome Powell is expected later on Wednesday to reaffirm that easy monetary policy will continue for a prolonged period and dismiss any suggestions of tapering bond purchases.
Analysts and traders have cut their gold price forecasts, with many believing a return to last year’s record highs is unlikely as economic recovery tarnishes the safe-haven metal’s appeal, a Reuters poll showed.
Goldman Sachs, however, sees gold prices at $2,000 an ounce over the next six months and said it was too early for bitcoin to compete with gold for safe-haven demand.
Palladium fell 0.5% to $2,927.84 per ounce, after hitting an all-time high of $2,962.50 on Tuesday.
Silver fell 1.1% to $25.97 per ounce. Platinum was down 0.9% at $1,218.
European stocks were slightly lower on Wednesday morning as global markets await comments from the U.S. Federal Reserve.
The pan-European Stoxx 600 dropped 0.25% in early trade, with travel and leisure stocks shedding 1.1% while insurance stocks gained 0.7%. Despite modest gains for British, French and German shares, many of the continent’s indexes slid into negative territory by mid-morning.
European investors are digesting a slew of earnings reports from Deutsche Bank, Sanofi, Dassault Systemes, Banco Santander, Spotify, French Connection, GlaxoSmithKline and Lloyds Banking Group, among others.
Deutsche Bank reported a 908 million euro ($1.1 billion) profit for the first quarter, its strongest quarterly profit for seven years, buoyed by continued strong performance in its investment banking division.
The German lender’s shares surged 6.6% to lead the Stoxx 600 in early trade, while Lloyds added 3.3% after also beating earnings expectations.