Gold Climbs 1% As Dollar, Treasury Yields Ease

Gold snapped a two-session slide to advance 1% on Tuesday as a weaker dollar and lower U.S. Treasury yields supported prices and lifted bullion’s appeal.

Spot gold was up 0.9% at $1,780.90 per ounce by 0854 GMT, after hitting a session high of $1,782.74. U.S. gold futures gained nearly 1% to $1,782.90.

A weaker dollar is gold supportive and the metal remains an “interesting asset for investors looking to hedge against the risk of inflation going out of control,” said Carlo Alberto De Casa, external analyst at Kinesis Money.

He added that, while gold has created a solid support zone between $1,750 and $1,760, “a clear indication from the European Central Bank on tapering could be a negative catalyst for bullion.”

Gold is often considered an inflation hedge, though reduced stimulus and interest rate hikes tend to drive up government bond yields, raising non-yielding bullion’s opportunity cost.

Helping gold rally, the dollar languished near the bottom of its recent range against major peers, knocked back by weak U.S. factory data overnight and by market wagers of faster normalization of monetary policy in other countries.

U.S. benchmark 10-year Treasury yields also eased, reducing bullion’s opportunity cost.

“But people are not persuaded enough to go very long on gold and macro investors for instance don’t seem to be persuaded to buy more gold to hedge inflation,” said Nicholas Frappell, global general manager at ABC Bullion, noting that stimulus tapering by central banks was “just a fact of life.”

Meanwhile, investors’ risk appetite remained as European stocks inched higher, with technology shares rising – mirroring overnight gains in their Wall Street peers.

Among other precious metals, spot silver gained 2.6% to $23.76 per ounce, platinum rose 1.5% to $1,051.47, and palladium climbed 2.9% to $2,074.29.