Gold Pares Gains as US Dollar, Bond Yields Resume Climb

GOLD - NEW YORK. Gold prices pared gains on Wednesday, hurt by a stronger dollar and a rebound in bond yields as investors digested Fitch's U.S. credit rating downgrade and focused on nonfarm payrolls data later this week.

Spot gold was up 0.1% at $1,945.60 per ounce at 09:50 a.m. EDT (1350 GMT), after rising as much as 0.6% earlier on some safe-haven bids after ratings agency Fitch downgraded the U.S. government to AA+ from AAA.

U.S. gold futures gained 0.2% to $1,982.50.

"Higher interest rates would ultimately put pressure on gold. Also, we are seeing more strength in the dollar. Prices are trapped below $2,000 and above $1,900 for the time being," said Daniel Pavilonis, senior market strategist at RJO Futures.

The dollar rose 0.4% to more than a three-week high, making gold more expensive for other currency holders. Benchmark U.S. 10-year Treasury yields rose to their highest since July 10.

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Data showed U.S. private payrolls increased more than expected in July, pointing to continued labor market resilience that could shield the economy from a recession.

The Federal Reserve raised interest rates by 25 basis points last month. According to the CME's FedWatch Tool, the probability that the Fed would leave rates unchanged at the September meeting was at 83%.

"Traders and investors are not badly shaken over the surprise Fitch news, but it did somewhat deflate heretofore upbeat marketplace attitudes that had recently pushed U.S. stock indexes to new highs for the year," wrote Jim Wyckoff, senior analyst at Kitco, in a note.

All eyes are on the U.S. nonfarm payrolls report for July due on Friday. Overall payrolls are forecast to rise by 200,000 jobs, after increasing by 209,000 in June.

Elsewhere, spot silver gained 0.4% to $24.44, platinum dropped 0.2% to $929.60 and palladium rose 0.3% to $1,243.64.