Gold scales one-week peak as dollar, US yields ease

[BENGALURU] Gold prices rose to a more than one-week peak on Thursday, after a weaker-than-expected US inflation data halted an advance in Treasury yields and the dollar.

Spot gold was up 0.2 per cent to US$1,729.24 per ounce by 2.53am GMT, after hitting its highest since March 3 at US$1,732.05 earlier in the session. US gold futures rose 0.4 per cent to US$1,729.10.

"We got a little bit of a shot in the arm for gold, when the CPI (consumer price index) number came in a little bit softer...the dollar surge abated a little bit and nominal yields stopped climbing, that's been a positive driver for gold," said IG Market analyst Kyle Rodda.

Benchmark US Treasury yields remained subdued, while the dollar nursed losses after the US CPI data on Wednesday did not change expectations that inflation will push higher and exceed the Federal Reserve's 2 per cent target.

Recent surge in yields have threatened gold's status as a hedge against inflation, since they translate into higher opportunity cost of holding bullion, which pays no return.

Investors are now awaiting a European Central Bank policy meeting later in the day to see if policymakers will take any action to reign in rising yields.

A US$1.9 trillion Covid-19 relief bill was finally approved on Wednesday and is expected to supercharge the US economic recovery.

"Gold's trend is still to the downside. We continue to see real yields pushing higher, and that's really driven by the optimism around economic recovery, as well as expectations that at some point...central banks will have to unwind policy support," Mr Rodda cautioned.

Among other precious metals, silver rose 0.1 per cent to US$26.19 an ounce. Palladium was down 0.4 per cent to US$2,297.40, while platinum gained 0.4 per cent to US$1,207.92.

REUTERS