Gold was bullish during the Asian session, completely erasing its 2021 losses as signs of inflationary pressures amplify investor concerns while the U.S. Federal Reserve assures investors of the outlook for monetary policy.
Gold is currently up 0.60% to $1,909.65, soaring past the $1,900-mark and gaining in eight of the past nine trading sessions at the time of writing this report.
The dollar index, which usually moves inversely to gold, inched down towards a four-month low to trade 89.71.
Benchmark U.S. 10-year Treasury yield fell to a two-week low during the last trading session to give a return currently at 1.56%.
Fed Vice Chairman, Richard Clarida on Tuesday said the central bank could be ready to discuss the slowdown of asset purchases, which he stated in the recent minutes from the Fed’s latest meeting.
He stated, “It may well be… there will come a time in upcoming meetings we will be at the point where we can begin to discuss scaling back the pace of asset purchases… that was not the focus of the April meeting. It is going to depend on the flow of data.”
SPI Asset Management’s managing partner, Stephen Innes, stated in an interview with Reuters, “A weaker dollar is helping and growing inflation risks are outweighing everything right now. This is about hedge against inflation right now.”
He further said, “Even if inflation is high, they’re (the Fed) going to be very, very dovish. What really matters for gold is front-end real rates. The Feds will continue to keep front-end rates low, which is going to weaken the dollar and gold is going to do quite well.”
European Central Bank policymaker, Yannis Stournaras warned that the central bank must keep its money taps fully open as the region’s fight against COVID-19 is far from over despite the progress in the rollout of vaccines.
Data released in the U.S. on Tuesday also disappointed. The CB Consumer Confidence index for May read 117.2 while new home sales fell to 863,000 in April. RJO Futures senior market strategist Bob Haberkorn told Bloomberg, “You have that slight miss on the U.S. data, and bond yields are creeping lower… that’s helping gold. Gold is just acting as a safe haven today.”
U.S. Senate Republicans plan to unveil a counteroffer to President Joe Biden’s $1.7 trillion infrastructure proposal on Thursday, though one of their leaders said on Tuesday the two sides remain far apart.
For other precious metals, palladium and platinum are currently trading $2,791.50 (Up 0.20%) and 1,205.00 (up 0.68%) respectively. Silver is also up 0.63 currently trading $28.24 at the time of writing this report.