Investing.com – Gold prices hovered above session lows Wednesday as fears of a full-blown trade war between the U.S-China eased, sending U.S. bond yields higher, hurting demand for safe-haven gold.
Gold futures for August delivery on the Comex division of the New York Mercantile Exchange fell by $4.00 or 0.31%, to $1,274.60 a troy ounce, hovering above a session low of $1,273.30.
The U.S. 10Y Treasury yields rose sharply as investor sentiment swung to riskier assets on the back of easing trade concerns and hawkish remarks from Fed chairman Jerome Powell, who said the case for gradual rate hikes was "strong."
Gold is sensitive to moves in higher in U.S. bond yields, which lift the opportunity cost of holding gold as it pays no interest.
Powell also said, however, that the threat of trade policy changes could force the Fed to question its outlook on monetary policy, which some analysts suggested may stem losses in the yellow metal.
"One saving grace for the Gold market is that the threat of a trade war can put the Fed in a holding pattern on future rate hikes," said Dillon Gage's metals division.
Gold prices have been mostly shunned as a possible destination for safe-haven flows despite recent threats of more tariffs from both the U.S. and China as investors fear the dollar has further room to advance.
Dollar-denominated assets such as gold are sensitive to moves in the dollar – A rise in the dollar makes gold more expensive for holders of foreign currency and thus, reduces demand for the precious metal.
In other precious metal trade, silver futures fell 0.11% to $16.31 a troy ounce, while platinum futures rose 0.86% to $872.30 an ounce.
Copper prices lost 0.03% to $3.05 coming off their lowest point this month as traders fret a U.S.-China trade war would slowdown both Chinese copper demand and commodities imports.