Weaker dollar buoys gold, while platinum scales a six-year high

Bengaluru — Gold rose on Wednesday, hovering near a one-week peak hit in the previous session, as a weaker dollar and rising hopes of a US stimulus elevated bullion’s appeal as a hedge against inflation.

Spot gold rose 0.3% to $1,842.41/oz by 0342 GMT. Prices hit their highest since February 2 at $1,848.40 in the previous session. US gold futures gained 0.3% to $1,843.50.

Making gold more affordable, the dollar fell to a near two-week low against rivals. “With US yields holding steady, gold is moving inversely to the US dollar. That says to me this is not a gold story, rather it is a weak dollar story,” said Jeffrey Halley, a senior market analyst at Oanda.

US President Joe Biden’s $1.9-trillion coronavirus relief bill is expected to pass through Congress with few changes despite opposition from Republicans over the price tag.

“US inflation numbers are the key risk,” Halley said, adding a higher figure could cause a short-term spike in the US dollar and push gold lower.

Higher inflation data boosts gold but also lifts treasury yields, which in turn increase the opportunity cost of holding bullion. The January consumer price index data is due at 1330 GMT.

Investors are also awaiting Federal Reserve chair Jerome Powell’s speech before a virtual Economic Club of New York event at 1900 GMT. Analysts largely expect Powell to reiterate the Fed’s commitment to keep monetary policy accommodative.

Platinum hit its highest since February 2015 at $1,206/oz and was last up 2.3% at $1,202.04. Platinum is used by vehicle makers for catalytic converter manufacturing to clean car exhaust fumes.

A global economic recovery along with Biden’s push for green energy would push the platinum market into a deficit this year, analysts said.

Spot silver gained 0.8% to $27.41/oz and palladium climbed 0.4% to $2,327.81. 
Reuters