Gold price near five-week lows, trapped by stronger dollar

London (Apr 26)  Gold prices hovered near five-week lows on Thursday as higher US bond yields and a stronger dollar dampened interest in bullion.

Worries about growing supply of US government debt and inflationary pressures from rising oil prices have pushed US 10-year bond yields above 3% for the first time in four years. That, in turn, has helped thrust the dollar to its strongest since January, making bullion more expensive for users of other currencies.

Higher bond yields, meanwhile, also reduce the attraction of non-yielding gold. Spot gold was up 0.1% at $1,324.95 an ounce at 11.56am GMT after having touched its lowest since March 21 at $1,318.51 on Wednesday. US gold futures were up 0.3% at $1,326.30 an ounce.

Interest from physical buyers and technical support at gold’s 100-day moving average of $1,319.55 helped prevent further falls.

"At these low [price] levels, the market could now attract some physical buying interest," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong. "The market has a very good [physical] support at about $1,310 and $1,315."

Gold has been stuck in a trading range between about $1,360 and $1,310 since hitting a one-and-a-half year high of $1,366.07 in January. It has been supported by geopolitical uncertainty, which has fueled demand for gold as a safe haven, but has been prevented from moving higher by fears of rising US interest rates that would push up bond yields and strengthen the dollar.

US GDP and inflation data on Friday could give new direction to prices, said Mitsubishi analyst Jonathan Butler. Stronger than expected economic growth or inflation would hurt gold by bolstering expectations of more rapid increases to interest rates.

Investors are also watching the European Central Bank (ECB) on Thursday for clues on when it will signal an end-date for its €2.55-trillion asset-buying programme.

In other precious metals, silver was up 0.4% at $16.59 an ounce after falling more than 1% on Wednesday. Platinum rose 0.6% to $911 and palladium was down 0.5% at $972.90.

Reuters

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