2022.04.0517:57:00UTC+00Gold Futures Settle Lower As Strong Dollar, Higher Bond Yields Weigh

Gold futures settled lower on Tuesday, weighed down by a stronger dollar and higher Treasury yields, amid expectations the Federal Reserve will start tightening its monetary policy to rein in inflation.

Remarks by Federal Reserve Governor Lael Brainard at a Minneapolis Fed conference that the central bank would start reducing its balance sheet at a "rapid pace" as as the May meeting, pushed up the dollar and dimmed the demand for the safe-haven yellow metal.

"Given that the recovery has been considerably stronger and faster than in the previous cycle, I expect the balance sheet to shrink considerably more rapidly than in the previous recovery," Brainard said in prepared remarks.

She added, "The reduction in the balance sheet will contribute to monetary policy tightening over and above the expected increases in the policy rate reflected in market pricing and the Committee's Summary of Economic Projections."

The dollar index climbed to 99.42, gaining more than 0.4%.

The yield on U.S. 10-year Treasury note rose to 2.562%. The yield on 5-year government bond climbed to 2.7% and the long-term 30-year Treasury yield rose to 2.59%.

Gold futures for June ended lower by $6.50 or about 0.3% at $1,927.50 an ounce.

Silver futures for May ended down by $0.056 at $24.534 an ounce, while Copper futures for May settled at $4.7950 per pound, up $0.0135 from the previous close.

The Fed minutes of its March meeting, due to be released on Wednesday, may provide additional clues about the outlook for monetary policy.

CME Group's FedWatch tool is currently indicating a 76.6 percent chance the Fed will raise rates by 50 basis points next month.

A report released by the Institute for Supply Management this morning showed U.S. service sector growth reaccelerated in the month of March.

The ISM said its services PMI rose to 58.3 in March from 56.5 in February, with a reading above 50 indicating growth in the sector. Economists had expected the index to rebound to 58.0.

The slightly bigger than expected increase by the services PMI follows three consecutive monthly decreases after the index reached a record high in November.

A separate report released by the Commerce Department showed the U.S. trade deficit was nearly unchanged in February, as imports and exports both increased.