Gold at three-week lows as dollar, bond yields stay elevated

Gold prices lingered at a three-week trough on Thursday, pressured by rising U.S. dollar and Treasury yields amid worries that the Federal Reserve will persist with sharp rate hikes.

FUNDAMENTALS

* Spot gold inched down 0.1% to $1,627.04 per ounce, as of 0049 GMT. Prices earlier hit their lowest level since Sept. 28 at $1,624.98.

* U.S. gold futures were down 0.1% at $1,632.60.

* The dollar index held steady, having risen 0.8% on Wednesday, while the benchmark 10-year Treasury yields hit a peak since mid-2008. [USD/]

* U.S. economic activity expanded modestly in recent weeks, although it was flat in some regions and declined in a couple of others, the Fed said on Wednesday in a report that showed firms growing more pessimistic about the outlook.

* With latest data showing inflation continuing to run at more than three times the central bank’s 2% target, the report may do little to temper expectations for a fourth straight 75-basis-point rate hike next month.

* While gold is considered a hedge against inflation, higher interest rates increase the opportunity cost of holding the bullion, which yields nothing.

* Euro zone consumer inflation was marginally lower in September than estimated earlier, data showed on Wednesday, but still at a record high, underlining market expectations of more rate rises before the end of the year.

* Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 6.08 tonnes on Wednesday, their biggest one-day outflow since July.

* Spot silver fell 0.4% to $18.36 per ounce, platinum dropped 0.6% to $878.52 and palladium slipped 0.6% to $1,988.78.