NEW YORK: Gold prices rose on Wednesday as a retreat in US Treasury yields and the dollar bolstered bullion’s appeal amid growing recession concerns.
Spot gold rose 0.4% to $1,840.39 per ounce by 1:59 p.m. ET (1759 GMT), and US gold futures settled at $1,838.4.
“The fundamental going in the gold market is this pendulum going back and forth between the inflationary pressures and Fed’s commitment to fight it,” said David Meger, director of metals trading at High Ridge Futures.
“Due to the Federal Reserve’s hawkishness, we see quick dips in the market from time to time. But we believe the pendulum is going to continue to swing more towards the side of underlying support for gold driven by underlying inflation.”
Investors also took stock of US Federal Reserve Chairman Jerome Powell’s testimony before Congress. Powell said the Fed is “strongly committed” to bringing down inflation and that the pace of future rate increases will continue to depend on incoming data and evolving economic outlook.
The dollar index slipped on Powell’s testimony, making gold more attractive for overseas buyers, while US Treasury yields also fell.
While gold is considered a hedge against inflation, interest rate hikes dim bullion’s appeal by increasing the opportunity cost of holding the asset, which pays no interest.
Compounding economic worries, soaring food prices pushed British consumer price inflation to a 40-year high last month.
“You have all the fears of rising recession risks and inflation providing quite a sound backdrop in terms of safe-haven demand; not that everybody’s rushing into gold, but people are clearly sticking to gold positions at the moment,” said Carsten Menke, head of Next Generation Research at Julius Baer.
Silver fell 0.9% to $21.46 per ounce, platinum was also down 0.9% at $928.97, while palladium declined 0.4% to $1,869.43.
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