Gold drops to 2-1/2-year lows as dollar extends rally, yields firm



(Updates prices)

*

Precious metals set for weekly falls

*

U.S. dollar hits 20-year high

*

Benchmark 10-year yields jump to 12-year highs

By Kavya Guduru

Sept 23 (Reuters) - Gold prices dropped over 1.5% to their lowest since April 2020 on Friday, hurt by an unrelenting rally in the U.S. dollar and Treasury yields as the Federal Reserve adopts a more aggressive stance to check surging inflation.

Spot gold XAU= was down 1.6% at $1,644.04 per ounce at 1:57 p.m. EDT (1757 GMT), after dropping as much as 1.8% to $1,640.20 earlier in the session.

U.S. gold futures GCv1 settled 1.5% lower at $1,655.60.

Bullion was headed for a second straight weekly fall, down about 1.8% so far.

"We're seeing relentless dollar strength here and that's going to keep gold vulnerable in the short term," said Edward Moya, senior analyst with OANDA.

"The economy is clearly heading towards a recession. The risks of a hard landing are elevated and this has been just continuing to drive flows into the dollar, which has been bad news for gold."

The dollar .DXY touched a 20-year high, dampening demand for greenback-priced bullion, while benchmark 10-year yields US10YT=RR jumped to their highest since April 2010.

"This should see (gold) prices trading broadly sideways over the rest of the year," Fitch Solutions said in a note.

Surging inflation has prompted several central banks to tighten monetary policy, with the U.S. Fed raising its benchmark overnight interest rate by 75 basis points on Wednesday.

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

"Gold and the other semi-investment metals like silver and platinum will likely continue to remain under pressure until the market reaches peak hawkishness," said Ole Hansen, head of commodity strategy at Saxo Bank, in a note.

Other precious metals also fell sharply and were on pace for weekly losses. Spot silver XAG= declined 4.1% to $18.84 per ounce, while platinum XPT= lost 4.8% to $857.46.

Palladium XPD= dropped 4.8% to $2,065.29.



Gold vs yields Link



Reporting by Kavya Guduru in Bengaluru;
Editing by Vinay Dwivedi and Shailesh Kuber

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.