Back At 3-Month Lows After BoC’s Surprise Hike

Gold is 0.3% higher in the Asia-Pac session, after closing at 1940.02 (-1.2%) on Wednesday as global bond yields surged after a surprise BoC rate hike fueled bets that global central banks are not yet done with tightening.

• Treasury yields rose 8-13bp across major benchmarks and the dollar erased earlier losses on Wednesday after the BoC decision.
• The BoC's 25bp increase brought the policy rate to 4.75% and marked a significant shift in direction, considering rates were left unchanged at the previous two meetings. The decision was attributed to stronger-than-expected GDP growth in Q1, a recent upturn in housing market activity, persistent excess demand in the economy, and a higher-than-anticipated CPI in April. Prior to the announcement, the market had assigned a 45% probability of a 25bp rate hike.
• In recent weeks, the price of the precious metal has remained relatively stable in a range centred on $1,950 per ounce, as investors eagerly await clearer signals regarding the future direction of US monetary policy.