Gold Futures Settle Lower As Dollar, Bond Yields Rise On Rate Hike Bets

Gold prices drifted lower on Tuesday as the dollar climbed higher against most of its major peers and bond yields moved up amid rising prospects of stricter policy measures by the Federal Reserve and the European Central Bank to combat soaring inflation.

The dollar index climbed to 102.17 in early New York session, but pared most of its gains subsequently and was last seen hovering around 101.75, up 0.08% from the previous close.

The yield on U.S. 10-year Treasury note rose to 2.846% this afternoon, while the yield on 30-year bond climbed to 3.06%.

Gold futures for August ended lower by $8.90 or about 0.5% at $1,848.40 an ounce, recovering from a low of $1,841.30.

Silver futures for July ended down by $0.408 at $21.688 an ounce, while Copper futures for July settled at $4.2960 per pound, down $0.0105.

Flash data from Eurostat showed Eurozone inflation accelerated further in May on surging energy and food prices, rising to a fresh record 8.1%, from 7.4% in April. The rate was forecast to climb to 7.7%.

The data heightened concerns about the pace and scale of looming interest rate hikes, with traders now factoring in an outsized 50 basis point ECB rate hike in July.

German inflation rose to its highest level in nearly half a century in May on the back of soaring energy and food prices, data released on Monday showed.

In a speech at the Institute for Monetary and Financial Stability in Frankfurt, Germany, Federal Reserve governor Christopher Waller said that he favored 50 basis point hike at every meeting until there is a substantial reduction in inflation.

In U.S. economic releases today, a report released by the Conference Board on Tuesday showed a modest decrease in U.S. consumer confidence in the month of May.

The Conference Board said its consumer confidence index dipped to 106.4 in May from an upwardly revised 108.6 in April. Economists had expected the consumer confidence index to drop to 104.0 from the 107.3 originally reported for the previous month.

According to a report released by MNI Indicators, Chicago-area business activity unexpectedly grew at a faster rate in the month of May, rising to 60.3 in the month, from 56.4 in April. The increase surprised economists, who had expected the business barometer to dip to 55.0.

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