Gold Steady As Taper Bets Offset Lower Bond Yields

Gold prices barely moved on Monday as the prospect of Federal Reserve’s policy tightening offset subdued U.S. Treasury yields. The 10-year bond yields remained close to more than a two-month low. It lowered the opportunity cost of holding the non-interest-bearing gold. Another headwind for the bullion is the dollar, which rose 0.1%. It made the metal more expensive for investors using rival currencies.

Spot gold is currently trading at $1,779.96 per ounce as of 0850 GMT.

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On Friday, the weaker-than-expected U.S. employment growth pushed the bullion 1% higher. But the data failed to change expectations about the Fed’s tapering plan. Fed officials will meet again on December 4. Now, market participants are waiting for the release of U.S. consumer price data on Friday.

Jeffrey Halley, a senior market analyst at OANDA, suggested that the Fed is likely to announce a quicker tapering if the Omicron variant is confirmed to be milder than the previous ones. He predicted gold to trade as low as $1,720 per ounce next week.

Standard Chartered analyst Suki Cooper noted that real yields appear to have more influence on gold prices than the dollar. He suggested that physical gold demand in China and India will slow down this month. It would, in turn, weigh on bullion prices.

Meanwhile, services industry activity in the U.S. hit a record high in November. But prices remained high, and supply chain constraints have not eased. Business activity also accelerated in the eurozone last month. But the recovery may be temporary as demand weakens and Omicron woes dampen optimism.

In physical trading, gold demand in major Asian hubs rose due to seasonal uptick and lower prices. Investors and traders in China, Singapore and Japan took advantage of lower domestic prices.

In India, jewelers are keen to make purchases for the wedding season because gold is an integral part of the wedding tradition. But they are postponing them in hopes that prices will drop further. Meanwhile, consumers are waiting for a clear price trend.

Jewelry sales in Hong Kong were also good. And a local dealer expects a seasonal strong demand in China this month. Current prices also prompted higher purchases by jewelers and manufacturers in Singapore.