Gold declines as dollar, treasury yields rise; silver plunges 1.4%

Gold prices declined on Tuesday, influenced by a rise in the dollar and Treasury yields as investors awaited U.S. inflation data later in the week. This data is crucial as it could offer insights into the Federal Reserve’s potential timing for interest rate adjustments this year.

As of 10:17 a.m. ET (1417 GMT), spot gold was down 0.4% to $2,323.60 per ounce. Concurrently, U.S. gold futures dropped 0.4% to $2,335.80.

The dollar strengthened by 0.2% against major currencies, increasing the cost of gold for holders of other currencies, while yields on 10-year Treasury bonds also saw a slight uptick.

“Gold prices traded with stability around $2330 as weakness in the dollar index helped Gold move higher by 0.20%. The expected weak PCE price index on Friday is attracting buyers to place bets on Gold. In Comex, Gold faces minor resistance at $2345-$2350 and strong support at $2310-$2315,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.

What’s weighing on gold prices?

According to the World Gold Council, global physically backed gold exchange-traded funds (ETFs), a significant demand category, recorded inflows of $212 million or 2.1 metric tons last week.

The non-yielding bullion reached a record high of $2,449.89 on May 20 and has increased by 12% year-to-date, bolstered by expectations of Federal Reserve rate cuts and robust purchases by central banks amidst geopolitical tensions.

This week, traders are eagerly anticipating U.S. first-quarter gross domestic product (GDP) estimates scheduled for Thursday, along with the report on the Personal Consumption Expenditures (PCE) price index on Friday.

Chicago Fed President Austan Goolsbee said in an interview with CNBC on Monday that he expects inflation to continue easing, a trend that could pave the way for a potential rate cut.

Reduced interest rates diminish the opportunity cost of holding precious metals.

In other markets, spot silver declined by 1.4% to $29.22 per ounce, platinum edged down 0.4% to $990.85, and palladium fell by 3.9% to $941.