Gold prices rise as easing Treasury yields lift appeal

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Gold rose slightly on Tuesday as a retreat in U.S. Treasury yields and growing recession fears offset headwinds from a relatively firm dollar.

Spot gold rose 0.2% to $1,775.29 per ounce by 1026 GMT, after hitting its highest since July 5 at $1,780.39 earlier in the session.

U.S. gold futures also gained 0.2% to $1,791.10.

Falling U.S. real rates have supported gold in recent days, and the next data point important for the metal is U.S. payrolls due on Friday, UBS analyst Giovanni Staunovo said.

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However, further interest rate hikes by the U.S. Federal Reserve and declining inflation should weigh on prices over the next six months, Staunovo said.

Benchmark U.S. 10-year Treasury yields hit a four-month low, decreasing the opportunity cost of holding the non-interest-paying bullion, while the dollar index steadied, having earlier hit a four-week trough.

Gold has benefited from a host of dour economic data recently, with a survey on Monday showing that factories across the United States, Europe and Asia struggled for momentum last month.

Investors are keeping a close eye on macro economic indications since Fed Chair Jerome Powell said decisions on future rates will be determined by incoming data.

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Rate hikes by major central banks to combat soaring inflation typically weigh on bullion’s appeal.

“Speculative financial investors who had previously built up short positions in anticipation of a further price slide are likely to jettison these again, which will likewise have a price-boosting effect (on gold),” said Commerzbank analyst Carsten Fritsch.

Traders are also keeping watch on possible escalation in Sino-U.S. tension, with U.S. House of Representatives Speaker Nancy Pelosi set to begin a visit to Taiwan amid objections from China.

Spot silver fell 0.4% to $20.26 per ounce, snapping a five-session rally, while platinum rose 0.3% to $909.10.

Palladium was down 1% to $2,171.66. (Reporting by Arundhati Sarkar and Brijesh Patel in Bengaluru; Editing by Uttaresh.V and Shailesh Kuber)