Gold gains on weaker dollar, treasury yields - REUTERS
BY Nakul Iyer
(Adds comment and updates prices)
* Gold could rise to $1,782/oz if it holds above $1,760- analyst
* U.S. factory production slips in September
* Dollar hits two-week low
Oct 19 (Reuters) - Gold rose on Tuesday, with a weaker dollar and U.S. bond yields providing some support to the precious metal, even as central banks move towards easing economic stimulus.
Spot gold rose 0.7% to $1,776.03 per ounce by 0620 GMT, while U.S. gold futures gained 0.7% to $1,778.20.
The dollar index hit a two-week low, making bullion cheaper for buyers in other currencies.
U.S. benchmark 10-year Treasury yields also weakened, reducing non-yielding bullion’s opportunity cost.
“Though gold is range-bound, if it holds above $1,760, it could rise to $1,782 and possibly even $1,800,” said Nicholas Frappell, global general manager at ABC Bullion, adding that a break below $1,759 could push it down to $1,737-$1,741.
“But people are not persuaded enough to go very long on gold and macro investors for instance don’t seem to be persuaded to buy more gold to hedge inflation,” Frappel said, noting that stimulus tapering by central banks was “just a fact of life.”
The Bank of England was gearing up to raise interest rates as inflation risks mount, Governor Andrew Bailey said on Sunday.
Gold is often considered an inflation hedge, though reduced stimulus and interest rate hikes tend to drive up government bond yields, raising non-yielding bullion’s opportunity cost.
“Economic growth is getting hurt and if risky assets start showing a correction, then gold is going to shine bright,” said Kunal Shah, head of research at Nirmal Bang Commodities, Mumbai, adding that gold could hit $1,850-$1,860 by end-November and bullion could rise even if yields move higher.
U.S. factory production dropped in September, as an ongoing global semiconductor shortage depressed motor vehicle output, another sign supply constraints were hampering growth.
Spot silver gained 1.6% to $23.53 per ounce, while platinum was up 1.5% at $1,050.84 and palladium rose 1.8% to $2,051.22. (Reporting by Nakul Iyer and Seher Dareen in Bengaluru; Editing by Rashmi Aich)