Gold rises as dollar, Treasury yields ease; focus on US inflation data

[BENGALURU] Gold prices rose on Tuesday (Jan 11), supported by a weaker US dollar and Treasury yields, as traders awaited December inflation data and weighed bets for quicker interest rate hikes.

Spot gold rose 0.3 per cent to US$1,806 per ounce by 2.32 am GMT. US gold futures were up 0.3 per cent at US$1,804.90.

"Pullback in both the US dollar and 10-year treasury yields are supporting gold prices, but the fact that markets are still seeing 3 to 4 interest rate hikes this year is limiting the upside potential," said Margaret Yang, a strategist at DailyFX.

The yield on 10-year Treasury notes inched away from an almost 2-year high of 1.808 per cent to 1.778 per cent.

Gold is considered a hedge against high inflation, but the metal is highly sensitive to rising US interest rates which increase the opportunity cost of holding non-yielding bullion.

Goldman Sachs now expects the US Federal Reserve to raise interest rates 4 times this year, matching the view of analysts at JPMorgan and Deutsche Bank.

The dollar eased against a basket of currencies as traders looked to incumbent Fed Chairman Jerome Powell's nomination hearing later in the day for new clues on the timing and pace of policy normalisation.

"Markets are seeing 5.4 per cent year-on-year growth in core inflation and if numbers surpass this forecast, we may see the dollar moving up even higher and gold prices dropping. However, if the inflation rate comes below expectation, that may provide some relief for gold," Yang said.

US core CPI is expected to have risen by an annual 5.4 per cent in December, up from 4.9 per cent in the prior month, which could stress the need for earlier-than-anticipated rate hikes by the Fed.

Spot silver was up 0.4 per cent to US$22.55 an ounce, platinum gained 1 per cent to US$949.28, and palladium rose 0.5 per cent to US$1,921.74.

REUTERS