Gold prices slipped for the second session in a row on Thursday after the U.S. dollar and Treasury yields inched higher ahead of forthcoming key inflation data, which could clarify the Federal Reserve’s interest rate plan. Investors are bracing for potential surprises that could force the Fed to recalibrate its monetary policy outlook.
The spot gold was down 0.4% trading at $2,330.44 per ounce, as of 0311 GMT, after seeing a fall of 1% on Wednesday. Bullion has dropped more than $100 since it hit a record high of $2,449.89 on May 20 as hawkish remarks from Fed officials and the last meeting minutes pointed to a prolonged path to a 2% inflation target.
Further, the remarks made by Minneapolis Fed President Neel Kashkari hinted at the possibility of another rate hike, significantly affecting market sentiments. The yield on the 10-year note hit a one-month high of 5.471%, while the yield on the 2-year note was 4.958%.
Also, geopolitical tensions have added to the risk premium for gold as concerns about debt pose long-term challenges to overall growth, said Navneet Damani, Group Senior Vice President of Commodity Research at Motilal Oswal Financial Services.
The dollar gained 0.5%, making the greenback-priced bullion less attractive for other currency holders. “We think that China is increasing its holdings of metals, including precious metals like gold and silver as well as base metals like copper and zinc, in order to lessen the long-term effects of a declining Chinese yuan,” said Bhavik Patel, Senior Commodity/Currency Research Analyst at TradeBulls Securities.
However, Motilal Oswal has a positive bias for Gold and Silver. It revised the upward potential target to Rs 81,000 in the domestic market. The financial services providing company has a “buy on dips” approach and advice to accumulate near Rs 69,000 on MCX.