Title: Gold prices ease as dollar, yields firm ahead of Fed minutes

Apr 06, 2022 02:40AM ET

By: AnalysisWatch

Gold prices fell on Wednesday after the dollar and Treasury yields jumped to multi-year highs on hawkish comments from U.S. Federal Reserve officials and as cautious traders braced for minutes from the U.S. central bank's latest meeting.

Spot gold was 0.3% lower at $1,918.74 an ounce at 04:12 AM ET. U.S. gold futures contracts fell 0.2% to $1,923.10.

"A stronger U.S. dollar and a lack of safe-haven demand are limiting its upside potential. (The U.S. dollar) is definitely taking the shine off gold, as any gains from support at $1,916 can't sustain any gains," said City Index chief market analyst Matt Simpson.

"Price action remains generally choppy and hesitant as to specific direction."

The dollar climbed to its highest level in nearly two years as Fed officials pushed for a quick reduction in the central bank's bloated balance sheet, with one expressing openness to a significant half-percentage point rate hike.

A stronger dollar makes gold less attractive to holders of other currencies.

The Fed's minutes from last month's meeting, to be released at 02:00 PM ET, may add details to policymakers' thinking on how quickly they might move to cut bond volumes and raise interest rates. The Fed's stance sounds increasingly hawkish.

US Treasury yields have reached multi-year highs, with longer-term yields moving faster and partially reversing some of the recent inversions in the US curve.

Gold is very sensitive to rising US interest rates and higher yields, which increase the opportunity cost of holding non-yielding metals while strengthening the dollar, in which gold is priced.

Silver fell 0.3% to $24.25 US per ounce, platinum fell 0.4% to $964.19 US, and palladium rose 0.2% to $2,242.04.