Gold set for second weekly advance as inflation, yields in focus

Spot gold rose 0.1% to $1 841.56 an ounce by 11:28 a.m. in Singapore, and is up 1.3% this week.
Image: David Gray/Bloomberg

Gold headed for a second straight weekly gain as investors sought an inflation hedge amid a retreat in US bond yields and equities.

With the US consumer price index rising the most in almost 40 years in the 12 months through December, there’s been added pressure on the Federal Reserve to tighten monetary policy.

Still, US Treasury Secretary Janet Yellen said Thursday she continues to forecast inflation falling close to 2% by the end of 2022. The yield on 10-year Treasuries has dropped from a two-year high, while the S&P 500 fell 1.1% Thursday.

Bullion is holding near a two-month high even as central banks prepare to dial back stimulus and inflation-adjusted bond yields rise. Fed officials are walking a tightrope as they lay the groundwork for a series of interest-rate increases that could begin as soon as March. The policy-setting Federal Open Market Committee meets on January 25-26.

Recent volatility in markets and geopolitical tensions has also supported demand for haven assets. A report that Washington is allowing some Baltic states to send US-made weapons to Ukraine stoked concerns about a standoff with Russia.

“The focus of gold traders is shifting back to next week’s FOMC with the Ukrainian tension factored into the price of precious metals,” said Avtar Sandu, a senior manager of commodities at Phillip Futures Pte. “Precious metals are seeing some position adjustment going into the weekend.”

Spot gold rose 0.1% to $1 841.56 an ounce by 11:28 a.m. in Singapore, and is up 1.3% this week. The Bloomberg Dollar Spot Index fell 0.1% after climbing 0.2% in the previous session. Silver, platinum and palladium all retreated.

© 2022 Bloomberg

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