Gold gained as the dollar eased following comments from President-elect Joe Biden’s cabinet nominees on the greenback, the merits of massive stimulus, and the outlook for trade.
US Treasury Secretary nominee Janet Yellen told the Senate Finance Committee that a slew of state spending was needed to fight the coronavirus pandemic, while playing down concerns about the debt it creates. US bond yields eased from Tuesday’s high and inflation expectations rose as she spoke, and held near those levels on Wednesday. Both have climbed since the start of the year.
Gold has edged lower in the opening weeks of 2021, after rallying last year, as higher yields and prospects for an economic recovery curbed the metal’s appeal as a haven. Bullion is now trading near its 50- and 200-day averages as investors weigh the outlook for rebounding economies against the potential for a weaker dollar and higher consumer prices.
“Gold has been facing headwinds from a strong US dollar and higher real rates so far this year,” said Stephen Innes, chief market strategist at Axicorp. Ltd. Still, “maximum stimulus overdrive” and a slightly weaker dollar paint an encouraging backdrop for gold prices provided real rates oblige, he said.
Spot gold rose 0.7% to $1,853.56 an ounce by 11:05 a.m. in London. Silver, palladium and platinum climbed as well, while the Bloomberg Dollar Spot Index was 0.2% lower.
Yellen also disavowed using exchange-rate policy to weaken the dollar, a difference from outgoing Treasury Secretary Steven Mnuchin, while not saying she backs a “strong” dollar. On trade, several cabinet picks signaled the new administration would continue some of Donald Trump’s hard-line policies toward China. Antony Blinken, the choice for secretary of state, said the US should bar goods made in Xinjiang.