Gold hovers below record peak as US dollar, yields firm after upbeat data

Gold prices on Tuesday hovered below record highs hit in the previous session, as the US dollar and Treasury yields held firm after strong US data flagged doubts on whether the Federal Reserve would deliver three interest rate cuts this year.

Spot gold was unchanged at $2,250.79 per ounce, as of 0415 GMT, holding below an all-time high of $2,265.49 hit on Monday. US gold futures gained 0.6% to $2,271.30.

“Gold notched up a new record price, though with that high watermark also came some overbought conditions, which has resulted in a mild pullback. However, recent pullbacks in gold have been shallow in nature due to potential buyers waiting on the sidelines for better entry points,” Tim Waterer, chief market analyst at KCM Trade said.

Bullion’s gains were held in check as the US dollar hovered near a 4-1/2-month high, while benchmark US 10-year Treasury yields were trading near their highest levels in two weeks after data showed US manufacturing grew for the first time in 1-1/2 years in March.

Traders pared bets of a June interest rate cut to 63% after the data, according to the CME Group’s FedWatch Tool.

Federal Reserve Chair Jerome Powell on Friday indicated the latest US inflation data did not undermine the central bank’s baseline outlook, but said with the economy on a strong footing, “that means we don’t need to be in a hurry to cut.”

“Traders will be casting an eye towards Friday’s US nonfarm payrolls release, because if we happen to see another strong jobs report this could provide a catalyst for a gold pullback,” Waterer said.

Gold tends to gain when interest rates are cut as it reduces the opportunity cost of holding bullion.

Elsewhere, spot silver rose 0.7% to $25.26 per ounce, platinum fell 0.1% at $900.65 and palladium climbed 1.1% to $1,006.84.