(Bloomberg) — Gold rose to a two-month high as yields fell across the U.S. Treasury curve and the U.S. dollar weakened.
U.S. stocks pared early gains on Wednesday as volatility returned to markets and investors assessed prospects for earnings growth. Falling bond yields and a weaker greenback help boost bullion’s appeal.
Gold has mostly held above $1,800 an ounce in January, after dropping in 2021 for the first time in three years as central banks globally started dialing back on pandemic-era stimulus. Still, bullion’s traditional role as an inflation hedge and the uncertainty over omicron’s impact is supporting demand for the haven asset.
“Given the calls for even more rate hikes this year than markets are pricing in, perhaps we’re seeing some inflation hedging from traders that don’t think central banks are doing enough to bring price pressures down,” said Craig Erlam, an analyst at OANDA.
A March rate hike is expected and will be the first of many increases this year, according to Bloomberg Economics. While a quarter-point increase is still the most likely scenario, swap markets are now pricing in more than 25 basis points of tightening by the end of March.
Spot gold was 1.4% higher at $1,838.05 an ounce at 10:57 a.m. in New York, after earlier rising as much as 1.4% to $1,838.60, the highest since Nov. 22. The Bloomberg Dollar Spot Index fell 0.2% after adding 0.4% in the previous session. Silver, platinum and palladium all gained.
