Bengaluru — Gold prices inched higher on Tuesday but held close to a more than two-week low, as the dollar jumped on bets for quicker interest rate increases after US President Joe Biden backed Federal Reserve chair Jerome Powell for a second term.
Spot gold rose 0.2% to $1,808.71 an ounce by 3.44am GMT, after sliding 2.1% to its lowest since November 5 on Monday. US gold futures gained 0.2% to $1,809.10.
The dollar index held near a 16-month peak after Biden nominated Fed chair Powell for a second four-year term and governor Lael Brainard as vice-chair. A stronger dollar increases bullion’s cost to buyers holding other currencies.
“There isn’t going to be any sudden hawkish shift due to the nomination, but a continuation to current policy with a quicker taper tabled by officials last week,” said Stephen Innes, managing partner at SPI Asset Management, adding, gold’s fall was likely more of a knee-jerk reaction to the dollar.
Fed officials Richard Clarida and Christopher Waller on Friday suggested a faster pace of stimulus tapering may be appropriate amid a quickening recovery and heated inflation. Higher interest rates increase the non-interest bearing metal’s opportunity cost, dampening its appeal.
Investors kept tabs on rising Covid-19 cases in parts of Europe which prompted restrictions.
“The Covid resurgence in Europe may cause central banks to back off rate hike expectations and there’s still some need for gold in this kind of environment,” Innes said, adding, gold faced resistance at $1,830 and its trajectory could be shaped by the Fed’s open market committee final make-up with three nominations still pending.
Spot silver rose 0.6% to $24.32 an ounce. Platinum gained 0.8% to $1,019.19 and palladium rose 1.3% to $1,979.96.