Gold Climbs on Lower Bond Yields, Dollar Before Fed Minutes

(Bloomberg) -- Gold climbed above $1,800 an ounce again as Treasury yields and the dollar fell ahead of the release of Federal Reserve minutes that may bring fresh insight on U.S. monetary policy.

European stocks and U.S. futures rebounded Wednesday, after slipping in the wake of weaker-than-expected figures on the American services sector. The yields on 10-year Treasuries continued to decline, while the dollar weakened, aiding gold.

Minutes from the Fed’s June gathering will be combed for more clues on the bank’s thinking around rates, bond purchasing and the economic outlook. The central bank pulled forward its forecasts for tightening monetary stimulus in June in a move that rippled through markets.

Gold has had a volatile year, and last month notched its steepest drop since 2016 as the dollar strengthened following the Fed’s hawkish shift. Since then, there have been tentative signs of a rebound, aided by softer inflation-adjusted Treasury yields, which boost the appeal of the non-interest bearing metal.

“Following recent economic updates, monetary policy is expected to remain loose as concerns about inflation and rapid economic growth fade,” Naeem Aslam, chief market analyst at Ava Trade Ltd., wrote in a note. This is also one of the reasons for the decline in bond yields and the scenario may persuade institutional investors to hold gold, which could cause the price to rise above $1,900, he wrote.

Spot gold rose 0.6% to $1,806.90 by 1:20 p.m. in London. It touched its highest since June 17 on Tuesday, before paring some of the gains. Silver, palladium and platinum rose. The Bloomberg Dollar Spot Index declined 0.2%.

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