Gold flat near one-week low as U.S. rate hike looms

Jan 19 (Reuters) – Gold prices were flat on Wednesday, steadying near a one-week low hit in the previous session, as the U.S. Treasury yields strengthened to two-year highs on expectations of quicker interest rate hikes by the Federal Reserve.

FUNDAMENTALS

* Spot gold was little changed at $1,813.04 per ounce by 0118 GMT, after falling to a one-week low of $1,805 an ounce on Tuesday. U.S. gold futures were steady at $1,813.30.

* Benchmark U.S. Treasury yields jumped to two-year highs on Tuesday, as traders prepared for the Fed to be more aggressive in tackling unabated inflation, ahead of its meeting on Jan. 25-26. read more

* Gold is considered an inflationary hedge, but the metal is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-interest bearing bullion.

* The U.S. dollar index (.DXY) posted its best daily gain in four weeks on Tuesday, rising to a one-week high against a basket of currencies, making greenback-priced gold less attractive for overseas buyers.

* Euro zone inflation is set to burn hotter throughout 2022 than expected a month ago, according to economists polled by Reuters, which could pressure the European Central Bank to tighten policy once the Omicron wave of the pandemic passes. read more

* The Bank of Japan raised its inflation forecasts but said it was in no rush to change its ultra-loose monetary policy. read more

* Oil prices climbed to their highest since 2014 as investors worried about global political tensions exacerbating the already tight supply outlook.

* Spot silver was steady at $23.44 an ounce, platinum was down 0.3% to $978.49, and palladium was little changed at $1,896.83.

DATA/EVENTS (GMT)

0700 UK CPI YY Dec

0700 Germany HICP Final YY Dec

1330 US Housing Starts Number Dec

Reporting by Seher Dareen in Bengaluru; Editing by Rashmi Aich

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