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Gold futures on Monday were seeing uneven trade, switching between small gains and losses, jeopardizing a seven-session run of advances for the commodity that has been buoyed by fears about post-COVID inflation pressures.
“It’s been quite a run for gold, which has soared as inflation indicators have continued to rise and become more widespread,” wrote Craig Erlam, senior market analyst at Oanda Corp., in a note.
December gold
GCZ21,
GC00,
was unchanged at $1,868.50 an ounce, following a weekly advance of nearly 2.9%, representing the best such gain since the period ended May 7. The rally for gold has been aided by a seven-session rally, marking the most-active contract’s longest stretch of gains since a nine-day rise ending July 29, 2020, according to Dow Jones Market Data.
A weaker dollar and a retreat in bond yields, conditions which were prevalent in Monday’s early action, have helped to pave the way for a march higher for precious metals.
The dollar, as measured by the ICE U.S. Dollar Index
DXY,
was down less than 0.1%, and the 10-year Treasury note yield
TMUBMUSD10Y,
was below 1.60%. A weaker dollar can underpin demand for assets priced in the currency and lower yields in government debt can also drive interest in gold, which doesn’t offer a coupon.
On top of those bullish factors for bullion, fears of out-of-control inflation, sparked by supply-chain bottlenecks and a demand surge, have helped to bolster appetite for the precious commodity. Gold is seen as a hedge against rising inflation.
“Gold has become popular despite higher yields and a stronger dollar, as inflation-adjusted yields remain at their lows. It’s also been seeing some love for its role as an inflation hedge, as we saw in the aftermath of the U.S. CPI data last week,” wrote Erlam.
Consumer-price data last week, showed that the pace of inflation over the past year marched to 6.2% in October from 5.4% in the prior month. That is more than triple the Federal Reserve’s 2% target and is the highest rate since November 1990.
