Gold firms as US bond yields fall, dollar up

Gold gave up early gains to trade flat on Tuesday as the US dollar was up, lower Treasury yields and growing recession fears kept the yellow metal near its four-week peak.

Gold settled in spot transactions at about $1,771.29 per ounce by 0843 GMT, after hitting its highest level since July 5, earlier in the session, at $1,780.39 per ounce.

Giovanni Stonovo, an analyst at UBS, said that the decline in real interest rates in the United States has supported gold recently.

However, Stonovo said that a larger increase in interest rates by the US Federal Reserve and lower inflation will affect prices over the next six months.

US 10-year Treasury yields hit a four-month low, reducing the opportunity cost of holding gold, while the dollar index rose 0.2 percent after hitting a four-week low earlier.

Gold has benefited from a batch of weak economic data recently, as Monday’s survey showed that factories across the United States, Europe and Asia struggled to boost activity last month.

Investors are closely watching macroeconomic indicators since Federal Reserve Chairman Jerome Powell said decisions about future rates will be determined by the new data.

The increase in interest rates by major central banks in order to combat high inflation usually affects the attractiveness of the yellow metal.

Traders are also watching for a possible escalation in Sino-US tension, as US House of Representatives Speaker Nancy Pelosi is scheduled to start a visit to Taiwan on Tuesday, amid objections from China.