Gold Flat as Dollar Retreat Offsets Rising U.S. Bond Yields

GOLD - JAKARTA. Gold prices were little changed on Tuesday, as a pullback in the dollar supported demand for greenback-priced bullion and countered pressure from a recovery in U.S. Treasury yields.

Spot gold was last up 0.1% at $1,825.29 per ounce, as of 0218 GMT. U.S. gold futures gained 0.6% to $1,825.60.

The dollar index steadied after falling from near 20-year highs on Monday and the tumbling Chinese yuan found a floor, as investors trimmed bets on whether U.S. interest rate hikes will drive further dollar gains. A weaker dollar makes gold more attractive for buyers holding other currencies.

However, benchmark U.S. 10-year Treasury yields climbed, limiting demand for non-interest-bearing gold. "Now that we have the much-needed clearout on gold markets, longer-term holders could start to position for the eventual southbound turn on the U.S. hard economic data," said Stephen Innes, managing partner at SPI Asset Management.

Asian shares edged higher despite data reinforcing investor fears the global economic recovery may be more fragile than expected, even as inflationary pressures remain high. Bullion is seen as a safe haven during economic crises and a hedge against inflation.

Gold slid to a 3-1/2-month low on Monday but reversed course later, tracking a fall in Treasury yields. On Friday, prices posted a fourth straight week of declines.

Spot silver dropped 0.2% to $21.56 per ounce, platinum was flat at $945.76, and palladium fell 1.2% to $2,002.17.

"With China on the verge of reopening and likely adding more stimulus, it benefits all hard commodities. And palladium is ultimately used in industrial applications, particularly within the auto sector; that segment could benefit from ports reopening in China," Innes said.

Improving demand and lower supply will help palladium and rhodium swing back into deficit this year and reduce platinum's surplus, consultants Metals Focus said on Monday.