Gold climbs on lower Treasury yields; focus on US inflation data

By Ashitha Shivaprasad

(Reuters) – Gold prices hit a near two-week peak on Wednesday, supported by a dip in U.S. Treasury yields, while focus shifted on key inflation data for further cues on U.S. rates.

Spot gold was up 0.6% at $1,871.79 per ounce by 2:26 p.m. ET (1826 GMT), its highest level since Sept. 29. U.S. gold futures settled 0.6% higher at $1,887.3.

Dovish comments from Fed officials that the U.S. central bank may pause tightening and turmoil in the Middle East are supporting the gold market, said Jim Wyckoff, senior analyst at Kitco Metals.

Atlanta Fed President Raphael Bostic said on Tuesday he sees no more U.S. rate hikes, while Minneapolis Fed President Neel Kashkari said “possible” higher bond yields meant the Fed could do less.

Benchmark 10-year U.S. Treasury yields fell for the second straight session, moving further away from their 2007 highs scaled last week. [US/]

Uncertainty around the path of the U.S. economy, potential oil price shocks, and the impact of labor union strikes, pushed Fed officials into a cautious stance at their meeting last month, according to minutes of the Sept. 19-20 session.

U.S. Consumer Price Index data on Thursday is expected to provide more clarity on the U.S. interest rate path.

A tamer inflation report will be bullish for the gold market and can push prices to $1,900, Wyckoff said.

Rising U.S. interest rates increase the opportunity cost of holding non-yielding bullion.

Investors also kept a tab on the developments in the conflict between Israel and Palestinian Islamist group Hamas. On Monday, prices climbed 1.6% as these geopolitical tensions lifted safe-haven demand.

Spot silver rose 0.8% to $21.99 per ounce. Platinum gained 0.6% to $885.75, while palladium dropped 0.5% to $1,163.29.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Mark Potter, Sherry Jacob-Phillips and Shilpi Majumdar)