Gold jumps 1% as dollar dips after Powell testimony

Key Points
  • Spot gold rose 1% to $1,819.58 per ounce by 2:26 p.m. ET.
  • U.S. gold futures settled up 1.1% at $1,818.50.

In this article

Gold bars at the Austrian Gold and Silver Separating Plant in Vienna, Austria.
Leonhard Foeger | Reuters

Gold prices climbed 1% on Tuesday as the dollar slipped after U.S. Federal Reserve Chair Jerome Powell's testimony before Congress did not spring any surprises in terms of monetary tightening, while a retreat in bond yields also lent support.

Spot gold rose 1% to $1,819.58 per ounce by 2:26 p.m. ET. U.S. gold futures settled up 1.1% at $1,818.50.

"The fact that Powell wasn't more hawkish than expected has maybe assuaged the gold market bulls a little bit," said Jim Wyckoff, a senior analyst at Kitco Metals.

Powell noted that policymakers were still debating approaches to reducing the Fed's balance sheet and said inflation is running very far above target and "it is a long road" to anything close to restrictive policy.

Following Powell's remarks, the dollar fell 0.4% against its rivals, while benchmark 10-year U.S. Treasury yields pulled back from recent highs.

Gold is often seen as a hedge against inflation, but bullion is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding it.

"Gold prices rose as the bond yield rally paused as Fed Chair Powell signaled the Fed is likely to begin normalizing policy this year," Ed Moya, senior market analyst at brokerage OANDA, wrote in a note.

"The longer gold stays above $1,800, the more annoyed the shorts will become."

Focus now shifts to the U.S. core CPI data on Wednesday, which is expected to have risen by an annual 5.4% in December from 4.9% in the prior month.

Peter Mooses, a senior market strategist at RJO Futures said economic uncertainty tied to the pandemic and volatility in wider markets also seemed to be helping safe-haven gold.

Silver rose 1.3% to $22.75 an ounce, platinum climbed 3.3% to $971.11 and palladium edged up 0.3% to $1,917.38.