Gold firms as investors seek taper cues from Powell's testimony

[BENGALURU] Gold prices rose on Wednesday after robust US inflation numbers lifted the metal's appeal as an inflation hedge, although gains were kept in check ahead of Federal Reserve Chair Jerome Powell's testimony as early tapering bets rise.

Spot gold was up 0.3 per cent at US$1,812.80 per ounce, as of 8.54am GMT. US gold futures gained 0.2 per cent to US$1,814.20.

"The inflation hedge property of gold has been enhanced following US CPI data, but gold is only slightly up because market participants are waiting for the Fed chief speech," Xiao Fu, head of commodity market strategy at Bank of China International.

"On the one hand, gold is getting boosted by inflation hedge, but on the other hand, rising market expectation for a rake hike at the end of 2022 is offsetting some of the price advances."

The biggest rise in US consumer prices in 13 years has intensified investor focus on messaging from the Fed.

Futures on the federal funds rate raised bets on Tuesday that the Fed would tighten monetary policy between December 2022 and early in the first quarter of 2023 after stronger-than-expected US inflation data.

Some investors view gold as a hedge against higher inflation, but a Fed rate hike would dull bullion's appeal as that increases the opportunity cost of holding the non-yielding metal.

Meanwhile, a slight retreat in the dollar and benchmark US 10-year Treasury yields are supporting gold prices.

"I'm expecting a hawkish tone in Powell's testimony. In that case, dollar will rise and gold will fall," Jigar Trivedi, a commodities analyst at Mumbai-based broker Anand Rathi Shares said.

"Psychological support is at US$1,800, but that will get breached very soon. I'm looking at US$1,760 as a support for the next 15 days."

Elsewhere, silver rose 0.3 per cent to US$26.05 per ounce, platinum climbed 0.9 per cent to US$1,114.20, while palladium eased 0.1 per cent to US$2,824.03.

REUTERS