Gold prices wobble as soaring dollar, sliding yields tussle

Gold saw choppy price action on Thursday, as the dollar hit a 20-year high, balancing support from a slide in Treasury yields, after the U.S. inflation data signalled the Federal Reserve would likely stick to its current, aggressive rate-hike roadmap.

Spot gold edged up 0.1% to $1,853.31 per ounce by 0642 GMT. U.S. gold futures were down 0.1% at $1,851.70.

The U.S. dollar reached its highest level in nearly two decades, a milestone it has set multiple times and hovered around recently, keeping up pressure on demand for greenback-priced bullion. 

U.S. consumer price growth slowed sharply in April as gasoline eased off record highs, suggesting inflation has probably peaked, although it is likely to stay hot for a while and keep the Fed`s foot on the brakes.

The inflation reading comes on the heels of the Fed raising its benchmark overnight interest rate by an aggressive half-a-percentage point last week — the biggest hike in 22 years — as it pushes to unwind ultra-easy pandemic-era monetary policy.

Although seen as an inflation hedge, bullion yields no interest, and is sensitive to rising U.S. short-term interest rates and bond yields.

"With inflation expectations rising and evidence of money flowing into gold, we`re left wondering if an important swing low formed yesterday (Wednesday) around above $1,830," City Index`s senior market analyst Matt Simpson said in a note.

Benchmark 10-year Treasury yields dropped for a fourth consecutive session, however, decreasing the opportunity cost of holding gold. 

There could be some support in the near term as investors know that once lockdowns in China are lifted, there may be more support for precious metals` demand, said Brian Lan, managing director at dealer GoldSilver Central.

Spot silver was down 0.7% at $21.40 per ounce, and platinum dipped 0.1% to $990.89, while palladium rose 0.5% to $2,046.00.