Gold firms on weaker dollar as investors gauge Yellen's views

Several gold bars are shown being held.
Akos Stiller | Bloomberg | Getty Images

Gold held on to gains on Tuesday as the dollar remained under pressure, with prospects for more stimulus buoying bullion's appeal as an inflation hedge.

Spot gold was up 0.2% at $1,840.38 per ounce, recovering from its lowest since Dec. 2 at $1,809.90 hit on Monday. U.S. gold futures settled up 0.6% to $1,840.20.

The value of the U.S. dollar should be determined by markets, Janet Yellen told Senate lawmakers at her confirmation hearing on Tuesday. Yellen also reaffirmed her commitment to relief measures and underlined the depth of the economic crisis.

Gold is considered a hedge against inflation and currency debasement that can result from widespread stimulus.

The dollar is "going to be driven by market forces and for the time being, market forces are pointing to a lower dollar," said Daniel Ghali, commodity strategist at TD Securities.

The dollar index slipped from a four-week high hit in the last session, making bullion cheaper for holders of other currencies.

"As long as we get this momentum (in equities) on the upside, it makes gold prices relatively trade within a range," said Jeffrey Sica, founder of Circle Squared Alternative Investments, adding the likelihood of more stimulus was very positive for gold.

"Global central bank members are cognizant that even though equity markets are doing well, the underlying economy is still very weak and stimulus measures are needed," said Michael Langford, director at corporate advisory AirGuide.

Investors also await U.S. President-elect Joe Biden's inauguration on Wednesday, and security measures have been stepped up in the light of the Jan. 6 attack on the U.S. Capitol.

Silver eased 0.4% to $25.22 an ounce, platinum gained 0.2% to $1,081.40 and palladium was down 0.2% at $2,366.08.