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Gold nudges up as dollar softens, eyes on Fed meeting

07/27/2021 | 12:48pm EDT
FILE PHOTO: Gold bullion is displayed at GoldSilver Central's office in Singapore

(Reuters) - Gold ticked up on Tuesday, as the dollar softened and U.S. real yields plunged to a record low, though gains were limited by investor caution ahead of a Federal Reserve policy meeting that could provide details on stimulus tapering.

Spot gold rose 0.1% to $1,799.40 per ounce by 12:28 pm EDT. U.S. gold futures were flat at $1,799.50.

The dollar index slipped 0.1%, lowering gold's cost for holders of other currencies.

Providing a further boost to the metal, the yield on 10-year Treasury inflation-protected securities (TIPS), hit a record low of -1.147%.

The precious metal, however, has been confined to a tight trading range in recent weeks after briefly crossing $1,830, failing to capitalise on subdued U.S benchmark treasury yields.

"Gold has to be looked at from a cross asset perspective and not just from bonds, and with strong returns in equity markets that impedes capital flows into gold," said Bart Melek, head of commodity strategies at TD Securities.

"To breakout higher, there has to be some negativity and that is right now only being manifested in bond yields," Melek said, while adding that weaker economic readings ahead would likely push gold prices higher again.

Investors are keeping a watch on how the Fed balances accelerating inflation with the increased economic threat of the Delta coronavirus variant, in its policy meeting that begins later in the day.

Lukman Otunuga, senior analyst at FXTM, also said in a note that gold could remain range-bound until the Fed meeting.

"A hawkish central bank could deliver a heavy blow to zero-yielding gold. However, a meeting filled with doves may boost the precious metal's allure, possibly sending prices higher."

Elsewhere, silver slipped 2.5% to $24.53 per ounce, platinum shed 1.9% to $1,043.65 and palladium fell 2.2% to $2,598.45, having earlier hit a one-week low of $2,590.

(Reporting by Nakul Iyer in Bengaluru; Editing by Anil D'Silva and Chris Reese)

By Nakul Iyer

© Reuters 2021
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