Gold holds tight range on investor caution over Powell remarks

Topics Gold  | Jerome Powell | Markets

Photo: Reuters

Gold steadied in a tight range on Wednesday, propped up by a subdued dollar, as investors digested monetary policy cues from Federal Reserve Chair Jerome Powell.

Spot gold was up 0.1% at $1,807.51 per ounce by 1049 GMT. U.S. gold futures were steady at $1,805.60.

Powell told the U.S. Senate Banking Committee that monetary policy still needed to be accommodative with economic recovery "uneven and far from complete". His testimony continues later in the day.

He also mentioned that the increase in yields was due to higher inflation and growth expectations.

"Powell did say that the recent run-up in bond yields was a statement of confidence in the U.S. economy, and that ... could mean the Fed is willing to allow rates to run even higher, which will create a challenge for gold," Saxo Bank analyst Ole Hansen said.

"For gold to recover again, it needs to be the inflation focus. The focus has faded and has been substituted by the current nervousness about the yields going higher."

U.S. Treasury yields hovered close to a one-year high, while the dollar held near the six-week low of 89.941 it reached overnight.

Rising yields tend to hurt bullion's appeal as an inflation hedge since they increase the opportunity cost of holding the metal.

But Powell's remarks also indicated that "the stimulus trade is unlikely to go away anytime in the next six months", Michael Langford, director at corporate advisory AirGuide said, adding the potential impact of inflation as a result of stimulus measures will be a key upward driver for gold.

Silver rose 0.4% to $27.72 an ounce. Platinum climbed 2.4% to $1,266.30, while palladium added 0.9% to $2,372.29.

The market expects the price difference between gold and platinum to narrow, amid an outlook for higher demand for the auto-catalyst due to new green technologies, Saxo Bank's Hansen said.

 

(Reporting by K. Sathya Narayanan and Sumita Layek in Bengaluru; Editing by Nick Macfie)



Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel