Gold hits one-week high as inflation pressures offset US Treasury yield rally

Bengaluru — Gold prices hit a more than one-week peak on Monday, as inflationary pressures due to surging oil prices helped cushion the impact of a US Treasury yield rally after an upbeat jobs report, while a drop in equities also boosted bullion's appeal.

Spot gold rose 0.2% to $1,810.26 per ounce by 6.20am, after hitting its highest since January 27 at $1,814.91 earlier in the session. US gold futures edged up 0.2% to $1,810.90.

“The largest component of inflation currently, beyond the supply chain issues, is oil prices. And this is a problem no matter how high you move interest rates,” said Stephen Innes, managing partner at SPI Asset Management. “Gold is getting a little bit defensive, realising that we could be in this state for hyperinflation.”

Oil prices rose on Monday, with Brent crude touching its highest since October 2014. Asian share markets slipped after stunningly strong US jobs data soothed concerns about the global economy and sent benchmark 10-year US Treasuries to their highest levels since December 2019 on Friday.

US inflation data for January is due on Thursday and strong data could further fuel the Federal Reserve's plan to raise interest rates after the US employment report showed nonfarm payrolls jumped by 467,000 jobs last month.

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

Gold was also supported as tensions between the West and Russia over Ukraine lingered. Two US officials said on Saturday Russia had in place about 70% of the combat power it could need to invade Ukraine.

Elsewhere, silver jumped 1.2% to $22.75 per ounce, platinum was steady at $1,024.44, and palladium rose 0.7% to $2,300.04.

Reuters