Gold near 2-week high as inflation risks lift safe-haven appeal

[BENGALURU] Gold prices were steady on Wednesday (Feb 9) near a 2-week high scaled in the previous session, as inflationary risks and Russia-Ukraine tensions underpinned the safe-haven metal, despite the prospect of an aggressive rate hike by the US central bank.

Spot gold was steady at US$1,825.89 per ounce by 1.08 am GMT, hovering close to Tuesday's high of US$1,828.68. US gold futures dipped 0.1 per cent to US$1,826.30.

Benchmark 10-year US Treasury yields were steady, but slightly lower compared with the November 2019 high reached in the previous session.

US inflation data for January is due on Thursday and expectations are for a 7.3 per cent annual rise, according to a Reuters poll, after robust labour data last week.

Market participants are pricing in more than a 70 per cent chance of a 25 basis point hike and a nearly 30 per cent chance of a 50 bp hike at the US Federal Reserve's mid-March meeting, according to CME's FedWatch Tool.

Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion. Higher rates also boost the dollar, pressuring the greenback-priced precious metal.

The European Central Bank will do everything necessary to steer inflation back to its 2 per cent target over time, Bank of France Governor Francois Villeroy de Galhau said on Tuesday.

French President Emmanuel Macron, the first leader of a major Western power to meet Vladimir Putin since Russia massed troops near Ukraine, said he believed steps can be taken to de-escalate the crisis and called on all sides to stay calm.

Among other metals, silver was steady at US$23.18 per ounce, platinum fell 0.5 per cent to US$1,026.94, and palladium was down 0.4 per cent at US$2,239.12. REUTERS