The gold dollar and the inflation of US bond yields

The spot price of gold fell 0.9% to $2,155 per ounce, after hitting an all-time high of $2,194.99 on March 8.

Reuters.- Gold fell today, Thursday, after a larger-than-expected rise in the US producer price index in February, which tempered expectations of an early cut in interest rates from the Federal Reserve (the US central bank), which boosted Treasury bond yields and the dollar.

At 1548 GMT, gold in spot transactions fell 0.9 percent to $2,155 per ounce, after recording the highest level ever at $2,194.99 on March 8. Gold futures in the United States fell 1 percent to $2,159.20.

The dollar rose 0.3% against its rivals, making gold less attractive to holders of other currencies, while the yield on 10-year bonds reached its highest levels in more than a week.

“I expect to see continued pressure (on gold), with all the data showing that the US economy is strong, and the labor market remains strong,” said Chris Gaffney, head of global markets at Everbank. “It really makes investors wonder how quickly the Fed will decide to start cutting (interest rates).”

The Labor Department said the producer price index for US final demand rose 0.6% in February. A Reuters poll of analysts expected the figure to rise by 0.3% in February.

The Fed is expected to hold interest rates at its meeting next week, but the focus will be on the “point” outlook. At its December meeting, the US central bank expected interest rate cuts of three-quarters of a percentage point by 2024.

According to CME Group's FedWatch tool, traders are still betting on a rate cut in June, with a 64% probability, up from 72% before the CPI data. Low rates favor gold, because they reduce the opportunity cost of holding bullion, which does not bear interest.

In other precious metals, the price of platinum in spot transactions fell 0.9% to $929.90 per ounce. Palladium fell 0.4 percent to $1,055.50. Silver fell 0.9 percent to $24.78 per ounce, after recording the highest level in more than three months at the beginning of the session.