Gold hits 1-week low on robust yields; focus on Fed statement

Gold prices fell to a one-week low on Wednesday, weighed down by firmer US Treasury yields with investors awaiting policy cues from the Federal Reserve's statement, while palladium eased after scaling a record high in the last session.

Spot gold was down 0.3 per cent to $1,771.50 per ounce by 9:18 am, having fallen to its lowest since April 20 at $1,765.70 earlier in the day. US gold futures eased 0.4 per cent to $1,771.20 per ounce.

"Strong US consumer sentiment data... and higher commodity prices are pushing yields up and gold prices down as a result," said IG Market analyst Kyle Rodda.

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Benchmark US 10-year Treasury yields jumped to their highest since April 15. While gold is considered a hedge against inflation, higher yields challenge that status as they increase the opportunity cost of holding bullion. US consumer confidence soared to a 14-month high in April, as more businesses reopened. The dollar index rose 0.1 per cent against its rivals, making gold more expensive for holders of other currencies.

Investors now await the Fed's statement due later in the day which is expected to provide cues on the central bank's monetary policy outlook. The market will be "looking for signals that maybe the Fed is starting to think about tapering or when they should taper", said IG Market's Rodda.

Analysts and traders have slashed their gold price forecasts, with many believing a return to last year's record highs is unlikely as economic recovery tarnishes the safe-haven metal's appeal, a Reuters poll showed.

Meanwhile, Japanese retail sales rose at the fastest pace in five months in March as consumer demand recovered from the hit it took from the pandemic.

Palladium fell 0.3 per cent to $2,931.82 per ounce, after hitting an all-time high of $2,962.50 on Tuesday. Silver fell 0.9 per cent to $26.01 per ounce. Platinum was down 1 per cent to $1,216.58.