Gold climbs from seven-week low after bond yields retreat
Gold climbed from the lowest in almost seven weeks as Treasury yields eased following dovish commentary from Federal Reserve Chair Jerome Powell.
The benchmark 10-year U.S. yield declined after touching the highest since June on Tuesday, boosting the appeal of non-interest bearing bullion. The dollar rose again to the highest since November.
During a Senate Banking Committee hearing, Powell maintained that the current high level of inflation in the U.S. should be expected to dissipate when supply-chain issues are resolved, adding that the economy was still far from full employment. The comments reassured investors that rate hikes were still a long way off.
Still, Fed Bank of St. Louis President James Bullard said he sees "upside risks" to inflation and the central bank should be prepared in case price pressures persist for longer than expected. Earlier this week, Fed Governor Lael Brainard and New York Fed President John Williams both said it may soon be time to scale back asset purchases.
Gold is heading for its biggest monthly loss since June as more central banks start signaling a pullback in stimulus measures used to cushion the economic impact of the pandemic. Last week, Powell said the Fed could begin scaling back asset purchases in November and complete the process by mid-2022. The Bank of England has left the prospect of a 2021 rate hike open, while Norway's central bank began tightening policy last week.
"Set against rising real rates and a strengthening U.S. dollar, we don't see inflation as strong enough to outweigh policy developments," analysts at Morgan Stanley wrote in a note. "We see lower prices ahead," averaging $1,621 an ounce next year, they added.
Spot gold rose 0.6% to $1,743.60 an ounce at 1 p.m. in London, after dropping as low as $1,728.18 on Tuesday, the lowest since Aug. 11. Silver slipped, while platinum steadied and palladium advanced. The Bloomberg Dollar Spot Index strengthened 0.2% after climbing 0.5% Tuesday.