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Gold futures on Tuesday extend a modest gain, with the precious metal supported by expectations for higher inflation and volatility in financial markets, with investors awaiting Jerome Powell’s confirmation hearing for a second four-year term as Federal Reserve Chairman.
Read: 4 mistakes the Powell Fed made—from a former insider
The modest advance for bullion comes as yields for government debt and the dollar have been climbing, which would usually serve as a headwind for the dollar-priced commodity that doesn’t offer a coupon.
“Despite yields on 10-year Treasury notes surpassing 1.80%, gold prices have been moving up as it is considered a hedge against inflation and investors are expecting inflation to continue rising in coming months as well,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily research report.
Bullion is viewed a hedge against inflation and has traditionally been perceived as safe-haven asset.
February gold
GCG22,
GC00,
trades $7.20, or 0.4%, to reach $1,805.90 an ounce, following a nearly 0.1% rise to start the week. Gold is looking at a third consecutive settlement in positive territory, which would mark the longest string of gains since a seven-session stretch ended Nov. 12.
The 10-year Treasury note
TMUBMUSD10Y,
was yielding 1.76%, down slightly from 1.779% at 3 p.m. Eastern Time Monday, while the dollar was trading 0.1% lower but holding on to a 0.2% advance for the week so far, as measured by the ICE U.S. Dollar Index
DXY,
Meanwhile, Powell is set to tell a Senate panel on Tuesday that the U.S. central bank will take steps to make sure higher inflation seen over the past year won’t be allowed to develop deep roots in the economy.
Separately, March silver
SIH22,
SI00,
was trading 15 cents, or 0.7%, higher at $22.61 an ounce, after gaining 0.2% on Monday.
Recent stock-market volatility also has underpinned buying in bullion, after the Nasdaq Composite Index
COMP,
on Monday fell 2.7% only to end slightly higher in the session.
“Furthermore, the turmoil in stock markets is also helping the precious metal move higher until stock traders are able to make sense of the situation,” Aslam wrote.
The outlook for gold remains one important concern, as expectations are growing that benchmark interest rates, which currently stand at a range between 0% and 0.25%, could be lifted at least three times this year, which could serve as a drag to bullion values.
