Gold rises 1% on lower U.S. yields, inflation worries

Gold prices rose about 1% on Monday, as a retreat in U.S. bond yields and persisting worries about inflation lifted the safe-haven asset ahead of major central bank meetings this week.

Spot gold gained 0.8% to $1,805.90 per ounce. U.S. gold futures for December delivery settled up 0.6% at $1,806.80 per ounce.

“The main reason for this rally is that yields backed off a little bit … but prices are still kind of range bound,” said Daniel Pavilonis, senior market strategist at RJO Futures.

“We have a lot going on this week in terms of earnings and data points. There maybe a situation where inflation is going to impact earnings and the Federal Reserve is realizing that and will thus be forced to taper.”

U.S. benchmark 10-year Treasury yields fell to a session low of 1.6200%, reducing the opportunity cost of holding non-interest bearing bullion.

Gold eased off its September highs on Friday after U.S. Fed Chair Jerome Powell reiterated his view that high inflation would likely abate next year and said the U.S. central bank should begin reducing its asset purchases soon.

“Powell’s recent comments may have amplified concerns of inflation sticking around for longer, which is apparently further eroding support for team ‘transitory’ and fuelling a stronger bid for gold as an inflation hedge,” said Han Tan, chief market analyst at Exinity.

Investor focus now shifts to the Bank of Japan and European Central Bank meetings due on Thursday, while the next U.S. Fed meet is due on Nov. 2-3.

While gold is often considered an inflation hedge, reduced stimulus and interest rate hikes push government bond yields up, raising the opportunity cost of holding bullion.

Elsewhere, silver rose 0.7% to $24.48 per ounce.

Platinum rose 1.5% to $1,056.61 per ounce. Palladium rose 1.3% to $2,048.77 per ounce.