Gold Rallies to 1 Week High on Rising Global Inflation Concerns

Gold prices were up early Tuesday despite a jump in US Treasury yields, as expectations for rising inflation triggered equity valuation concerns and drove investors towards the safe haven metal.

Spot gold rose 0.1% to $1,809.57 per ounce by 0057 GMT, having hit its highest since Feb. 16 at $1,812.31 on Monday. U.S. futures on the precious metal gained 0.1% to $1,809.30.

Spot Gold Price chart

The dollar reached multi-year lows on Monday against the British pound and the Australian dollar as traders focused on the promise of coronavirus vaccinations and economic growth outlook.

On Monday, US benchmark 10-year treasury yields jumped to their highest in about a year, increasing the opportunity cost of holding non-yielding bullion.

Inflation Effect on Gold

Rising real yields and inflation concerns have made equity valuations look more stretched in comparison and prompted investors towards safe haven assets like gold, which is widely viewed as a hedge against inflation.

U.S. President Joe Biden on Monday launched changes to the U.S. coronavirus aid program for small businesses to try to reach smaller and minority-owned firms.

The advancement of a proposed $1.9 trillion U.S. COVID-19 relief bill added to concerns about inflationary pressures. Gold is often viewed as a hedge against inflation.

The European Central Bank is “closely monitoring” the recent rise in government bond yields, ECB President Christine Lagarde said on Monday, the clearest sign yet that policymakers are becoming uncomfortable with the recent surge in borrowing costs. The yields on the 10-year bonds of Germany, France and Italy fell after her remarks. Bond yields in the U.S. and eurozone have increased lately, on the view that the rollout of vaccines and fiscal stimulus will reflate the global economy

Bitcoin fell on Monday after surging to its latest record high a day earlier as a sell-off in global equities curbed risk appetite.

Bitcoin Gold
Bitcoin Activity chart, BTC has fallen to below $50K

The United States on Monday crossed the staggering milestone of 500,000 COVID-19 deaths.

Investors now await the testimony of U.S. Federal Reserve Chairman Jerome Powell on the Semiannual Monetary Report to Congress on Tuesday.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 1.1% to 1,115.4 tones on Monday.

Silver eased 0.4% to $28.04 an ounce. Platinum shed 0.4% to $1,267.46, while palladium climbed 0.3% to $2,401.52.

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