Gold prices were flat on Thursday, with a weaker dollar countering pressure from firm bond yields, while traders awaited clues on the pace of interest rate hikes from the Federal Reserve’s policy meeting next week.
Spot gold was unchanged at $1,839.25 per ounce by 0558 GMT, after hitting its highest since Nov. 22 at $1,843.94 earlier. Prices jumped the most in three months on Wednesday.
U.S. gold futures fell 0.2% at $1,840.10.
Although there is some profit-taking after Wednesday’s jump, the Russia-Ukraine situation may still fuel a gold rally, as investors look for safe-haven assets to hedge against geopolitical tensions, said Margaret Yang, a strategist at DailyFX.
Tensions simmer between the West and Russia, with U.S. President Joe Biden predicting Moscow would make a move into neighbouring Ukraine, while Russian officials have denied this. But the Kremlin has massed some 100,000 troops near Ukraine’s borders.
The dollar was mostly lower, underpinning gold by making the greenback-priced metal less expensive for holders of other currencies, but 10-year Treasury yields firmed, raising the opportunity cost of holding bullion.
The Fed will tighten monetary policy faster than expected earlier to tame persistently high inflation, now viewed by economists polled by Reuters as the biggest threat to the U.S. economy over the coming year.
Although gold is considered an inflationary hedge, the metal is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-interest bearing bullion.
Despite hawkish signals from the Fed board, gold is doing well and it seems like investors think this sudden hike in interest rates to stifle inflation could cause growth to weaken, said Stephen Innes, managing partner at SPI Asset Management.
Spot silver increased 0.1% to $24.15 an ounce, platinum gained 0.1% to $1,022.50, and palladium was flat at $2,001.91.