Gold futures fall as elevated bond yields dent appeal

Gold futures fell slightly on Wednesday, as traders weighed expectations of tightening Federal Reserve monetary policy and higher yields

U.S. gold futures traded 0.15% lower at $1,956 per ounce. Spot gold, meanwhile, ticked higher by 0.2%, bouncing off a two-week low

“We are seeing higher yields, we are still seeing much more hawkish rhetoric from certain central bankers within the Fed. … That’s taken some of the wind out of gold’s sails and triggered the corrective move that was arguably due,” said Craig Erlam, senior market analyst at OANDA

On Tuesday, gold prices fell as much as 1.8% as hawkish comments from U.S. central bank officials, including St. Louis Federal Reserve Bank President James Bullard, propelled the dollar and 10-year Treasury yields to multiyear highs

The yield on 10-year Treasury Inflation-Protected Securities, or real yields, touched two-year highs on Wednesday, briefly rising into positive territory for a second straight day

Gold is highly sensitive to rising U.S. interest rates and Treasury yields, which increase the opportunity cost of holding the non-yielding bullion while boosting the greenback in which it is priced

On the day, the dollar hovered slightly below the more than two-year peak touched in the previous session.

From a technical point of view, $2,000 was a key level of resistance and stopped the increase of gold prices, said Carlo Alberto De Casa, external market analyst at Kinesis

“A large majority of investors are also waiting for the Fed to raise interest rates by 50 basis point

On Monday, gold came close to the key level of $2,000 per ounce but has since come under some pressure