Gold gains as inflation worries outweigh higher yields

February 7, 2022: Gold prices rose on Monday, as growing worries over broadening price pressures lifted the metal's appeal as an inflation hedge and helped cushion pressure from higher U.S. Treasury yields after a surprisingly upbeat jobs report.

FUNDAMENTALS

Spot gold rose 0.2% to $1,810.38 per ounce by 0129 GMT, hovering close to its highest nearly a week reached last Friday, while U.S. gold futures edged up 0.2% to $1,812.10

The dollar index was flat, while benchmark 10-year U.S. Treasuries hit their highest levels since December 2019 on Friday.

The Labor Department's employment report showed nonfarm payrolls jumped by 467,000 jobs last month, which could sustain the Federal Reserve's plan to raise interest rates.

Wild swings in stocks and a sharp run-up in government bond yields have put the spotlight on this week's U.S. inflation data, as investors brace for more volatility across assets.

Due out on Thursday, the U.S. consumer price index for January was expected to have risen 0.5%, culminating in an annual rise of 7.3%, which would be the largest such increase since 1982, according to a Reuters poll.

Gold is considered a hedge against inflation and geopolitical risks, yet rate hikes would raise the opportunity cost of holding non-yielding bullion.

Two U.S. officials said on Saturday Russia had in place about 70% of the combat power it could need to invade Ukraine, while Russia said it was not planning an invasion but could take unspecified military action if its security demands were not met.

Silver rose 0.9% to $22.67 per ounce, platinum edged 0.1% up to $1,025.47 and palladium was up 0.7% to $2,299.68.

Reuters